RESEARCH REPORT

Occupational change and

wage inequality:
European Jobs Monitor 2017
 Occupational change and
wage inequality:
European Jobs Monitor 2017

European Foundation
for the Improvement of
Living and Working
Conditions
When citing this report, please use the following wording:
Eurofound (2017), Occupational change and wage inequality: European Jobs Monitor 2017, Publications Office of the
European Union, Luxembourg.

Authors: Enrique Fernández-Macías and John Hurley (Eurofound); and José María Arranz-Muñoz (Universidad de
Alcalá)
Research manager: Enrique Fernández-Macías
Eurofound project: European Jobs Monitor
Acknowledgements: The authors would like to thank Andrea Garnero, Stephen Kampelmann, Brian Nolan,
Luis Ortiz, François Rycx, Andrea Salvatori, as well as Eurofound colleagues and members of the Advisory Committee
for Labour Market Change for their very useful input to earlier versions of this report.

Luxembourg: Publications Office of the European Union

Print: ISBN: 978-92-897-1581-2 ISSN: 2363-0825 doi:10.2806/989106 TJ-AN-17-101-EN-C
Web: ISBN: 978-92-897-1580-5 ISSN: 2363-0833 doi:10.2806/332137 TJ-AN-17-101-EN-N
© European Foundation for the Improvement of Living and Working Conditions, 2017
For rights of translation or reproduction, applications should be made to the Director, European Foundation
for the Improvement of Living and Working Conditions, Wyattville Road, Loughlinstown, Dublin D18 KP65, Ireland.
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Contents

Executive summary 1

Part 1: Shifts in the employment structure 3

1 Labour market context 5

Jobs-based approach: Methodology 8

2 Employment shifts in the EU, 2011–2016 11

Variety of patterns across Member States 12
Recovering labour markets 15
Growing and declining jobs 17

3 Patterns of employment change by sector, employment status and worker characteristics 21

Developments by broad sector: The service transition 21
Atypical employment growing across the wage distribution 24
Core employment share stabilising 25
Growing male share of part-time work 27
Non-natives dominate new employment in lower-paid jobs 27
Summary 29

Part 2: Wage inequality from an occupational perspective 31

4 Background and methodology 33

Methodology 34

5 Static analysis of the role of occupations in determining the wage distribution 37

Initial considerations and theoretical arguments 37
Occupations and wage inequalities: An initial overview 39
Analysing the economic arguments 41
Analysing the sociological arguments 43
Summary 49

6 Occupational wage differentials across European institutional models 51

Varieties of capitalism and occupational wage structures 51
A discussion of country differences 52
Conclusion 55

7 Occupations and the evolution of wage inequality in Europe 57

Introduction 57
Analysis of the role of occupations in the recent evolution of wage inequality 58
Conclusion 63

8 Conclusions 65

Bibliography 67

Annexes 71
Annex 1: Shifts in employment composition 71
Annex 2: Handling of data breaks 72
Annex 3: Comparing employment shifts using different job quality measures 73
Annex 4: Categorisation of the service sector 75
Annex 5: Member State shares of employment in top 12 jobs 76
Annex 6: Occupations and the evolution of wage inequality over three decades 77
Annex 7: Detailed examination of occupations and wage inequality in Spain 80

iii
Country codes
AT Austria FI Finland NL Netherlands
BE Belgium FR France PL Poland
BG Bulgaria HR Croatia PT Portugal
CY Cyprus HU Hungary RO Romania
CZ Czech Republic IE Ireland SE Sweden
DE Germany IT Italy SI Slovenia
DK Denmark LU Luxembourg SK Slovakia
EE Estonia LT Lithuania UK United Kingdom
EL Greece LV Latvia
ES Spain MT Malta

iv
Executive summary
Introduction
During 2016, employment in the EU finally returned to
the same level as before the global financial crisis. The
recovery that began in 2013 has resulted in the net
creation of eight million new jobs. Most of this net new
employment has been created in services, but there has
also been a marked rebound in manufacturing
employment, with around 1.5 million new jobs.
This, the sixth annual European Jobs Monitor report,
looks in more detail at recent shifts (from the second
quarter (Q2) of 2011 to 2016 Q2) in employment at
Member State and aggregate EU levels. Part 1 of the
report applies a ‘jobs-based approach’ to describe
employment shifts quantitatively (how many jobs were
created or destroyed and in what sectors) and
qualitatively (what kinds of jobs they were, primarily in
terms of average hourly pay). Part 2, a more analytical
section, discusses the role that occupations play in
structuring European wage inequality, and to what
extent the observed patterns of job polarisation and
upgrading have contributed to wage inequality trends
in the last decade.
Policy context
The EU’s Europe 2020 strategy for smart, sustainable
and inclusive growth includes a commitment to
fostering high levels of employment and productivity.
This implies a renewed focus on the goals of the earlier
Lisbon Agenda, ‘more and better jobs’. More jobs are
needed to address the problem of unacceptably high
unemployment rates. But Europe also needs better and
more productive jobs if it is to succeed once again in
improving living standards for its citizens in an
expanding, integrated global economy. The European
Commission’s 2012 Employment Package (‘Towards a
job-rich recovery’) identifies some sectors in which
employment growth is considered most likely: health
services, information and communications technology,
and personal and household services, as well as the
promising if hard-to-define category of ‘green jobs’. The
jobs-based approach adopted in this report provides
up-to-date data about employment levels and job
quality in growing and declining sectors and
occupations.
The jobs-based approach was pioneered in the 1990s in
the USA by Nobel Laureate Joseph Stiglitz and then
refined by Erik Olin Wright and Rachel Dwyer. The
particular question that this earlier American work
addressed – was job growth being achieved at the
expense of job quality? – has become more nuanced
over time. The jobs-based approach has, in particular,
been used to assess the extent to which employment
structures in developed economies are polarising,
leading to a ‘shrinking’ of mid-paid jobs, or upgrading as
the supply of highly qualified workers increases. To the
extent that employment in some labour markets
appears to be polarising, this research also connects
with broader concerns about increasing inequality.
Key findings
Shifts in employment, 2011–2016
£ There were eight million more people at work in
2016 Q2 in the EU compared with three years
previously. Employment growth since 2013 has
been only modestly skewed towards well-paid jobs.
There has been robust growth in low-paid and mid-
paid jobs as well, consistent with a
consumption-led recovery.
£ Over a longer time frame (going back to the late
1990s), higher-paid jobs have continued to grow
faster relative to those in the rest of the wage
distribution. This has been the case in recessionary
and non-recessionary periods alike.
£ More than 7 out of 10 jobs in the EU are now in
services, a sector that alone has added over 8
million jobs in the EU since 2011. Recent service
sector employment growth has been
asymmetrically polarised, with greater gains in jobs
at the top and bottom of the wage distribution.
£ There has also been an increase of 1.5 million in the
manufacturing employment headcount since 2013.
Most of this increase has been in engineering,
professional and management jobs in the top wage
quintile and not in more traditional, blue collar
production roles. Proportionately, the EU13
countries (those that have joined the EU since 2004)
have been the main beneficiaries of net new
manufacturing employment.
1
Occupational change and wage inequality: European Jobs Monitor 2017
£ In many of the faster-growing large jobs, the share
of older workers has increased significantly,
suggesting that extended working lives and later
retirement are as important in explaining recent
employment growth as any resurgence of labour
market dynamism.
Occupational change and wage inequality
£ Occupations play an important role in the
structuring of wage inequality in Europe. This is
partly because occupations mediate the effect on
wage inequality of other factors such as human
capital, social class and segregation by gender or
age. But occupations have their own effect on wage
inequality, too, probably as a result of specific
mechanisms such as occupational licensing,
credentialing or apprenticeship systems.
2
£ Although there are wide differences across Europe
in the levels of wage inequality, occupations
provide a remarkably similar backbone to the
distribution of wages in all countries. The
distribution of variance in wages between and
within occupations and the hierarchy of
occupational wages (which occupations pay more
and which pay less) are essentially the same across
all countries. The actual differences between the
wages paid by occupations and the extent to which
they are grouped in broad classes or linked to
differences in human capital are aspects that do
vary across countries.
£ Despite the deepening and generalisation of job
polarisation in Europe in the aftermath of the Great
Recession, occupational dynamics did not drive
wage inequality developments in the last decade.
Changes in the distribution of wages within
occupations were much more consequential for
overall wage inequality trends than changes in the
wages paid by the different occupations or changes
in the occupational structure.
 Part 1:
Shifts in the employment structure
1 Labour market context
In 2016, somewhat later than in other developed particularly steep contraction of 2008–2013. Secondly,
economies, employment levels in the EU recovered all the recovery has, as recent Commission analysis
the net losses experienced since the global financial indicates, been strongly consumption-led rather than
crisis. Just over 223 million people were in work in the fuelled by export or investment. This has led to
EU in 2008; 223.6 million were in work in 2016.1 At the ‘stronger job creation in the services sector, which is
post-crisis trough in 2013, the number was just over more labour intensive and more reactive to the
215.5 million. dynamics of consumption’ (European Commission,
2016, p. 1). Such employment growth is also likely to
Recessions based on banking crises are steeper, and
have been less productivity-enhancing, which would, in
recovery from them takes longer. Reinhart and Rogoff
part, explain relatively tepid output growth. It is
(2009) estimated that recovery – measured as the
important in this regard to highlight that the analysis in
restoration of gross domestic product (GDP) per head to
this report is based on a headcount approach; given
pre-crisis levels – takes over 7 years following a financial
declines in average hours worked and the increasing
crisis, compared with 4.5 years after a ‘normal’
share of part-time employment, the total number of
recession. GDP per head in the EU as a whole had
hours worked by EU workers was still nearly 2% lower in
returned to 2008 levels in 2015.2 Using aggregate EU
2016 Q2 compared to 2008 Q2.
employment headcount as a labour market indicator
leads to broadly similar conclusions. It has taken 7–8 The recent boost in employment levels is reflected in
years to get back to a pre-crisis level. higher levels of labour market participation, higher
employment rates and declining unemployment rates.
There has nonetheless been sustained employment
Demographic factors, however, no longer offer the
growth since the second quarter (Q2) of 2013, which has
boost to employment levels that they once did. Since
been broadly shared across Member States. The EU
2010, the working age population in the EU has begun
added some 8 million net new jobs between 2013 Q2
to contract at an annual average of 0.15% after rising at
and 2016 Q2, of which 3.8 million were created between
an annual average of 0.32% between 2000 and 2010. In
2015 Q2 and 2016 Q2. Even though the aggregate
Germany, the combination of sustained labour demand
employment headcount in the EU has been restored to
and contracting supply has contributed to a very tight
the pre-crisis level, the composition of employment has
labour market (the unemployment rate fell to 4% in
altered significantly over the last eight years. This report
2016 Q3).
seeks to describe these changes and then to use the
‘jobs-based approach’ to add further detail on how Given a very similar stock of EU employment headcount
shifts in employment (for example, by country, sector, in 2008 and 2016, it is an obvious but nonetheless
gender, working time or contractual status) are shared interesting exercise to compare what has changed over
across the wage or job quality distribution. the crisis and post-crisis periods. Periods of crisis in
particular are associated with rapid shifts in
In some respects, the gathering momentum of job
employment composition as some sectors and
creation in recent years is unexpected; net employment
occupations are disproportionately impacted by the
expansion of 1.7% per annum – as recorded between
selective nature of job destruction during downturns.
2015 Q2 and 2016 Q2 – results normally from above-par
This was clearly the case in 2008–2010 when the
output growth. But real EU output growth has only
manufacturing and construction sectors together
intermittently, and then very marginally, passed above
accounted for all the net employment declines suffered
2% over a long period, going back to 2008. Why has
in the earliest and severest years of the crisis. As Figure 1
employment growth surpassed output growth? Two
confirms, the employment shares of construction and
possible explanations can be advanced. Firstly, just as
manufacturing remain much reduced in nearly every
employers hoard labour at the onset of a recession, they
Member State, notwithstanding three years of
may hesitate to hire at the onset of a recovery until such
employment growth. The primary sector (agriculture
time as they consider it established. From this
and mining principally) also represents a declining
perspective, much of the recent job growth arises, for
share of employment in most countries – rapidly
example, from deferred hiring decisions or from delayed
declining in the case of Croatia, Poland, Portugal,
recovery in cyclical sectors strongly affected by the
Romania and Slovenia.

1 EU-LFS data for France since 2014 include employment in overseas departments (départements d’outre-mer, DOM), amounting to over 500,000 people. To
ensure compatibility over time, DOM employment has been excluded in all analysis in this report.

2 In the 19 Member States of the euro zone (EA19) and the 15 Member States that joined before 2004 (EU15), the recovery has taken even longer; 2016 data
should, when available, indicate full recovery.

5
Occupational change and wage inequality: European Jobs Monitor 2017

Figure 1: Percentage point change in composition of employment, by Member State and main sector
(2008 Q2–2016 Q2), and service sector employment share, by Member State (2016 Q2)

10 100
8 90
6 80
4 70
Percentage points

2 60
0 50 %
-2 40
-4 30
-6 20
-8 10
-10 0

Primary Manufacturing Construcon Services Services share (right-hand axis)

Note: The percentage point change in composition of employment is plotted on the left-hand axis, and the percentage of service sector
employment is plotted on the right-hand axis.
Source: EU-LFS (authors’ calculations)

The counterpart of these declines has been the
increased share of service sector employment in all
Member States. Services now account for 71% of EU
employment. In some Member States (Austria, Germany
and Hungary), the shift to services has been quite
modest (less than 2.25 percentage points), but in 13
Member States, the shift has been notably sharper
(more than 5 percentage points). These can be roughly
divided into two groups. In the first group are those
Member States, already indicated above, where the
main recomposition of employment has been away
from the relatively large primary sector to the service
sector. In the second group – which includes the Baltic
states, Cyprus, Ireland and Spain – sharp employment
falls in the manufacturing and construction sectors
explain in large part the increasing services share of
employment.
Manufacturing employment has been in secular decline
in advanced economies for over 40 years as a result of
the twin influences of technological innovation (capital
replacing labour) and trade (globalisation and the
replacement of domestic labour by foreign labour). This
secular decline has tended to manifest itself as stable
employment levels in periods of economic growth,
followed by sharp contractions in downturns. That
historical pattern has been repeated, to some extent,
over the last eight years. The manufacturing sector in
the EU employed 41.1 million people in 2008 Q2, 36.2
million in 2013 Q2 and 37.7 million in 2016 Q2; so while
there has been some recovery of lost manufacturing
jobs in recent years, employment remains 8% below its
pre-crisis level.
The construction sector is one that is typically
considered more cyclically sensitive – employment
tends to grow in upturns and decline in downturns –
and more labour intensive, but the evidence of recent
years is surprising for different reasons. Firstly, the
contracting employment share of construction appears
to be a common pattern across nearly all Member
States, notwithstanding how differently the crisis
affected individual Member States, in terms of both the
severity of output declines and the core role played by
construction in these declines in some countries such as
Ireland, Latvia and Spain. Secondly, employment in the
sector has recovered even more slowly post-2013 than
has been the case in manufacturing. The resumption of
economic growth has not, so far, been accompanied by
the rebound in construction sector employment that
might have been expected. There were nearly 20%
fewer (3.7 million) construction sector jobs in the EU in
2016 compared to 2008. What explains this contraction?
Clearly one factor was the over-exuberant and, in
retrospect, unsustainable growth of the sector in the
pre-crisis years in some countries. The construction
employment share rose to nearly double its long-term
average in countries such as Ireland and Spain. Much of
the subsequent job loss was a reversion to the mean.

6
 Labour market context

Table 1: Labour market indicators, EU

2016 Change 2008–2016

EU (%) (percentage points)
Employment rate (20–64-year-olds) 71.1 0.6
Gender employment gap 8.1 -2.5
Part-time share of employment 20.5 2.3
Older worker (55+ years) share of employment 18.6 4.6
High-skilled white collar worker share of employment* 41.0 1.8

* ‘High-skilled white collar worker’ refers to International Standard Classification of Occupations (ISCO) main groups 1, 2 and 3 (managers,
professionals and associate professionals). Change data for this indicator are for 2011–2016 only due to a classification break.
Note: For full national data, see Annex 1.
Source: EU-LFS (authors’ calculations)

But the generality of the decline in construction
employment across countries also suggests other
factors may be in play. Perhaps there is a more
technological explanation, based on increasing capital
investment and decreasing labour intensiveness in the
sector. Other possible factors include: demographic
trends, notably declining rates of population growth;
decreasing levels of public investment, including
expenditure on public housing; and the declining
affordability of housing for the cohort of household-
forming age.
The workforce has changed across a number of other
dimensions as well. Table 1 presents the most
important shifts in workforce composition – in the sense
that similar changes are likely to have occurred in all, or
a very large majority, of Member States.
In addition to the already noted increasing share of
employment in the service sector, the main changes
identified are:
£ an increasing share of older workers, arising from
the compound effects of declining youth
participation and employment, reduced early
withdrawal possibilities and later retirement;
£ an increasing incidence of part-time work, arising
from a significant replacement of (mainly male) full-
time employment by new part-time employment
(shared more or less evenly by gender);
£ a declining gender employment gap;
£ an increasing share of employment in white collar
occupations requiring generally high skill levels
(managers, professionals and associate
professionals), reflecting both patterns of labour
demand skewed towards services and higher skills
and the ‘natural’ upgrading of the workforce as older
workers retire and younger cohorts, with higher
average qualifications, enter the labour market.

Figure 2: Employment rates of 20–64-year-olds, by Member State, 2008 Q2–2016 Q2

85

80

75

70
%
65

60

55

50

2008 Q2 Minimum 2008–2016 2016 Q2

Source: EU-LFS (Eurostat website)

7
Occupational change and wage inequality: European Jobs Monitor 2017
However, the starting point for this study is the shifting
composition of employment by country within the EU
(Figure 2). The crisis and post-crisis periods have been
experienced very differently across the labour markets
of Member States. In two larger Member States, whose
labour market performance has, in living memory, seen
each labelled as the ‘sick man of Europe’, nearly five
million net new jobs were created between 2008 Q2 and
2016 Q2. Labour markets in both Germany (+2.9 million)
and the UK (+2 million) recovered early from the crisis
and account for the lion’s share of net new jobs in the
EU. Both have met and comfortably surpassed the EU
target of a 75% employment rate. They share this
achievement with a number of other northern and
central European Member States including the Czech
Republic, Denmark, Estonia, Lithuania, the Netherlands
and Sweden.
Accentuating the geographical shift of employment
from south to north is the still largely unrepaired
destruction of employment in many southern Member
States. Spain has shed more than 2.3 million jobs over
the same period, while Greece and Romania have both
shed over 900,000 jobs and Portugal over 500,000. In the
case of Greece, Portugal and Spain, the severity of the
crisis and the consequences of the policies undertaken
to confront it explain much of the job attrition. In the
case of Romania, the net job loss appears to have as
much a demographic as an economic basis. In common
with some other eastern European Member States –
Bulgaria, Latvia and Lithuania – as well as Portugal, the
overall population has declined, and a disproportionate
share of that contraction has been among people of
working age, indicative of significant net emigration.
While the divergences noted above are stark, and
particularly so within the euro zone Member States, the
most recent period of employment growth since 2013
has seen some sustained recovery in most of the
Member States whose labour markets suffered most
during the crisis period. Employment levels have risen
faster in Spain in the period 2013 Q2–2016 Q2 (+6.6%
increase) compared with the EU as a whole (+3.7%). This
has also been the case for Ireland (+7.8%), Greece
(+4.7%) and Portugal (+4%) as well as for Estonia and
Lithuania, where the crisis began earlier and the
recovery is more established. As Figure 2 confirms,
employment rates in each of these countries rose
substantially from their post-crisis minima. For some
countries, notably Greece and Spain, these are just the
first steps towards the normalisation of labour markets.
Most of the jobs lost in these two countries during 2008–
2013 have not been recovered, and unemployment
rates remain high (23% and 19% respectively, 2016 Q4).
3 In most of the charts of Part 1, 2011 Q2–2016 Q2 is the time frame used. Revision of the ISCO classification in 2010–2011 to ISCO-08 means that figures
relating to earlier periods are based on job rankings using the older ISCO-88 classification. Occasionally, shorthand reference in the text is made to
2011–2013 and 2013–2016; unless otherwise noted, figures are based on second-quarter data from the relevant year.
8
Jobs-based approach:
Methodology
The approach in Part 1 of the report is to focus on:
£ how the structure of employment in Europe has
changed in recent years (2011 Q2–2016 Q2 3);
£ what implications this has had for aggregate
employment quality;
£ how the compositional changes already indicated
(for example, increasing part-time or a higher share
of women in the workforce) have contributed to
these changes.
To do this, the ‘job’ is taken as the unit of analysis.
A ‘job’ is defined here as a given occupation in a given
sector – such as a customer service worker in the retail
sector or a health professional (doctor) in the health
sector. This is an intuitively attractive definition and
corresponds to what people would consider when
describing their job, or to how an employer advertises a
new job opening.
This definition is useful for both theoretical and
empirical reasons. The two concepts of occupation and
sector correspond to two fundamental dimensions of
the division of labour within and across organisations.
The sectoral classification designates the horizontal
distribution of economic activities within a country
across organisations generating different products and
services. The occupational classification provides an
implicit hierarchy of within-organisation roles – senior
managers, line managers, professionals, associate
professionals, production staff and so on. Established
international classifications, such as ISCO (for
occupation) and the Statistical Classification of
Economic Activities in the European Community (NACE)
(for sector), mean that it is relatively easy to
operationalise the jobs-based approach using the
standard labour market data sources, such as the EU
Labour Force Survey (EU-LFS). This provides a highly
detailed disaggregation of the workforce in each
country based on commonly applied occupational and
sectoral classifications to ensure international
comparability.
The jobs-based approach requires not only the
definition of a job in an intuitive, conceptually coherent
and empirically practical way but also some means of
evaluating these jobs in relation to their quality. The
job-wage has been the main proxy of job quality in
much jobs-based analysis, originating in the work of
Nobel Laureate Joseph Stiglitz in the 1990s (CEA, 1996)
and subsequently refined by Erik Olin Wright and Rachel
 Labour market context

Dwyer (2003) and others. The analysis that follows relies level is also provided using education- and job-quality-
mainly on a wage-based measure to rank jobs, but some based rankings for comparison (see Annex 3).
overview of recent employment shifts at EU aggregate

Box 1: Methodological note on the jobs-based approach

The main, simplified steps of the jobs-based approach are as follows:
1. Using the standard international classifications of occupation (ISCO-08) and sector (NACE Rev 2.0) at two-
digit level, a matrix of jobs is created in each country. Each job is an occupation in a sector. In total, there are
43 two-digit occupations and 88 two-digit sectors, which generate 3,784 job cells. In practice, many of the
theoretical job cells do not contain employment; there are unlikely to be many skilled agricultural workers in
financial services, for example. The country total of job cells with employment varies between around 400
and just over 2,000 and is largely determined by country size and labour force survey sample size. The bigger
the workforce, the greater the variety of possible job combinations that can be identified using LFS data.
2. The jobs in each country are ranked based on some ranking criterion, mainly the mean hourly wage. The job-
wage rankings for each country used in this report are based on combining data from the EU-LFS annual data
files for 2011–2014 and aggregated data from the Structure of Earnings Survey (SES) for 2010. These sources
allowed the creation of country job-wage rankings for the 28 Member States.
3. Jobs were allocated to quintiles in each country based on the job-wage ranking for that country. The best-
paid jobs are assigned to quintile 5, the lowest-paid to quintile 1. Each quintile in each country should
represent as close as possible to 20% of employment in the starting period – in other words, jobs are
assigned to quintiles based on their employment weights. From this point on, the job-to-quintile assignments
remain fixed for each country so that, in all of the charts that follow in Part 1 of this report, a given quintile in
a given country (however broken down) always refers to employment data in a specific group of jobs
exclusive to that quintile. For presentation purposes, the focus then is shifted to the change in the stock of
employment at quintile level during a given period in each country (for example, 2011 Q2–2016 Q2).
Figure 3 illustrates in simplified format the three steps outlined above, using some of the top-paid and lowest-
paid jobs that employ large numbers at EU level as examples. (While the jobs are correctly assigned in terms of EU
quintile, the individual job-wage ranks, 1–4 and 1,105–1,108, are for illustrative purposes only.)

Figure 3: Job rankings and quintile assignments carried out for each country

Rank Sector Occupation

1 Financial services Corporate managers
2 Legal/accounting activities Other professionals
3 Education Teaching professionals
4 Human health activities Life science and health professionals
... ...
... ...
1,105 Agriculture Skilled agricultural/fishery workers
1,106 Services to buildings Sales/services elementary occupations
1,107 Education Sales/services elementary occupations
1,108 Food manufacture Craft workers

Quintile 1 Quintile 2 Quintile 3 Quintile 4 Quintile 5

Low-paid 20% Mid-low-paid Mid-paid Mid-high-paid High-paid 20%

9
Occupational change and wage inequality: European Jobs Monitor 2017

4. Net employment change between starting and concluding periods (in people employed) for each quintile in
each country is summed to establish whether net job growth has been concentrated in the top, middle or
bottom of the employment structure. This generates a series of charts similar to Figure 4. Except where
otherwise indicated, all charts in the report describe net employment change by quintile for the indicated
country or for the EU as a whole. The EU aggregate charts are based on applying a common EU job-wage
ranking (based on the weighted average of the standardised national job-wage rankings).
The resulting quintile charts give a simple, graphical representation of the extent of employment change in a
given period, as well as an indication of how that change has been distributed across jobs with different pay.
(A similar classification of jobs can be carried out using job-holders’ skills or a broad-based, multidimensional
indicator of job quality as a ranking criterion – see Annex 3.) Figure 4, for example, illustrates employment change
for the EU28 during 2011 Q2–2016 Q2 using the job-wage quintiles. The figure should be read from the leftmost
bar cluster (quintile 1, representing the lowest-paid jobs) to the rightmost cluster (quintile 5, representing the
highest-paid jobs). Net employment change is represented on the vertical axis, generally in thousands but
sometimes in annual percentage change. The dominant feature of the chart is the addition of around 3.9 million
well-paid (top-quintile) jobs over the period.

Figure 4: Net employment change (in thousands) by job-wage quintile, EU, 2011 Q2–2016 Q2

4,000

3,000

2,000

1,000

0
Low-paid Mid-low-paid Mid-paid Mid-high-paid High-paid

Note: EU27 (Luxembourg data omitted); Q2 data in each year.

Source: EU-LFS (authors’ calculations)

This method also offers further possibilities of breaking down these net employment changes by such categories
as gender, employment or professional status, or working time category (full time or part time), which are used
later in Part 1. For a more extensive description of the data processing involved, see Annex 3. Further background
documentation includes Eurofound (2008b), as well as extensive material in the annexes of previous European
Jobs Monitor (EJM) annual reports – see Eurofound (2008a, 2011, 2013, 2014, 2015b) – where the same jobs-based
approach was used.
For the jobs-based approach to characterise employment shifts accurately, an important condition is that the
ordinal ranking of a job – whether that ranking is based on hourly wage, educational level of the job-holder or
some broader index of job quality – remains stable over the period covered. In practice, there is a high level of
correlation of job-based rankings over time – health professionals in the health sector tend to be in the top
quintile and cleaners and helpers in the services to buildings sector tend to be in the bottom quintile in most
periods – and across countries.

10
2 Employment shifts in the EU,
2011–2016
This chapter uses the jobs-based approach to describe
employment developments by job-wage quintile
primarily during the period from 2011 Q2 to 2016 Q2.
Overall trends in the EU are looked at first, with the
varying patterns of change in the individual Member
States then described. It goes on to examine the
individual jobs contributing to the shifting patterns at
EU level.
The five-year period between 2011 Q2 and 2016 Q2
divides naturally into two periods. The earlier period of
employment decline coincides with the second, so-
called ‘double-dip’, recession following the global
financial crisis and covers the period 2011 Q2– 2013 Q2
in this report’s analysis. This is broadly also the period
of the sovereign debt crisis, tightening budgetary
supervision and contracting public budgets. Some 1.2
million job losses were added to the 5 million previously
lost during the global financial crisis period (2008–
2010). As already noted, 2013 Q2 marks a turning point,
and the most recent three-year period has seen some
significant employment growth, with approximately
eight million net new jobs created in the EU. Figure 5
shows employment shifts by wage quintile for the EU as
a whole for 2011–2013 and 2013–2016 as well as for
earlier periods based on previous EJM analyses.
Figure 5: Employment change (% per annum) by job-wage quintile, EU,* 1998–2016
1998–2007 2008–2010
2 2
0 0
-2 -2
-4 -4
* Different EU country aggregates and periodisations due to data availability as follows: 1998–2007, EU23 (no data for Cyprus, Malta, Poland or
Romania), based on annual EU-LFS data; 2008–2010, EU27 (no data for Croatia); 2011–2016, EU27 (data for Luxembourg omitted).
Note: For all periods from 2008, figures are based on Q2 data in each year, extracted from EU-LFS in November 2016, and may differ slightly from
previously reported figures due to data revisions.
Source: EU-LFS, SES (authors’ calculations)
As the figure illustrates, new employment since 2013
has been more evenly spread across the wage
distribution, with only a mild skew towards the top
quintile. Employment grew in each of the job-wage
quintiles during 2013–2016. As aggregate economic and
labour market performance has begun to normalise
(since 2013), the sharpened employment polarisation
observed during the period of employment contraction
has given way to more balanced growth during 2013–
2016. Overall, aggregate growth continues to be
modestly upgrading, and the relative performance by
quintile remains similar before and after 2013, and
indeed going back to the late 1990s – employment
growth has been consistently strongest in the top
quintile, followed by the lowest and mid-high quintiles
and with weakest growth in the middle and mid-low
quintiles.
Employment continued to grow in well-paid, high-
skilled jobs in the top quintile throughout 2008–2013,
although at a more modest pace than in the long period
of employment expansion that preceded the 2008
global financial crisis. Bottom-quintile employment also
tended to be more resilient than that in the middle
quintiles, suffering relatively modest losses.
2011–2013 2013–2016
2 2
0 0
-2 -2
-4 -4
11
Occupational change and wage inequality: European Jobs Monitor 2017
The consistent feature of employment shifts over all
periods is the relative outperformance of the top
quintile. Well-paid jobs have added employment even
during the peak crisis period (2008–2010) and
contribute disproportionately in all periods to overall
employment growth. A secondary recurring pattern
across the four periods is the relative weakness of
employment growth in the mid-low and middle
quintiles, though the resulting pattern of employment
polarisation was clearest during the recessionary period
and has been much attenuated in the most recent
period (2013–2016). In summary, while one can certainly
make a case that employment polarisation has occurred
in each of the four periods covered, the dominant shift
has been one of employment upgrading favouring
growth in well-paid jobs.
Variety of patterns across
Member States
Until recently, the debate about shifts in the
employment structure in developed economies was
largely focused on two main patterns of change –
upgrading and polarisation. Each has its own
supporting narrative – ‘skill-biased technological
change’ in the case of upgrading and ‘routine-biased
technological change’ in the case of polarisation.
Upgrading shifts should lead to a linear improvement in
employment structure, with the greatest employment
growth in high-paid (or high-skilled) jobs and the
weakest growth in low-paid (or low-skilled) jobs, with
middling growth in the middle. With polarisation, the
main difference is that the relative positions of the
middle and bottom of the job distribution are swapped:
employment growth is weakest in the middle and
relatively stronger at both ends of the job-wage
distribution, leading to a ‘shrinking’ or ‘hollowed’
middle.
In both accounts (skill-biased technological change and
routine-biased technological change), the principal
driver of employment change is technology, and its
principal effect is to increase the demand for skilled
labour in developed economies at the expense of less-
skilled labour. Higher skills levels endow those who
possess these skills with the capacities to utilise and
master new technologies. This should enhance their
individual productivity. But while technology tends to
complement those with higher skills, it is more likely to
substitute those with lower skills, whose job tasks are
more easily replaceable by machines.
The main explanation of the differences in the two
accounts relates to where in the wage distribution – at
the bottom or in the middle – those jobs most
susceptible to technological displacement lie.
Exponents of routine-biased technological change claim
that the most vulnerable jobs are routine jobs with a
high share of easily codifiable tasks (for example,
12
routine clerical and manufacturing or production jobs).
These happen to predominate in the middle of the wage
distribution in developed economies (Autor et al, 2006).
Less-routine jobs – for instance, personal services at the
bottom of the wage distribution, such as hairdressers or
restaurant workers, and knowledge-intensive
professional services at the top, such as lawyers or
medical doctors – are less easy to automate and
therefore less vulnerable to replacement.
A sometimes complementary, sometimes distinctive,
explanation emphasises the role of international trade
and its differential effects on the employment structure.
The less-routine jobs indicated above involve services
that generally have to be carried out in person or in a
particular place. Offshoring them or performing them
remotely is often not feasible. They may, additionally,
be subject to specific national occupational licensing
frameworks, particularly, for example, higher-skilled
occupations in the health or professional services
sectors. For these reasons, such jobs enjoy some
protection from the threats of both technological and
trade displacement. More routine administrative,
clerical or manufacturing jobs may not benefit to the
same extent from these protections and are, as a result,
more vulnerable to displacement.
While the academic literature on structural shifts in
employment in developed market economies tends to
give more weight to technological change as the main
determinant of shifts (Goos et al, 2009), there has also
been important recent analysis that emphasises the role
of import competition from China, for example, in the
rapid decline of American manufacturing employment,
especially after China’s entry into the World Trade
Organization in 2001 (Autor et al, 2016). More generally,
the decline of developed-world employment in
manufacturing sectors clearly arises out of a
combination of competition from low-cost economies
(trade) and technology, with trade arguably the more
important factor in, for example, traditionally labour-
intensive sectors relying on basic skills, such as textiles
and clothing.
Previous EJM annual reports have drawn attention to
other important factors likely to have a bearing on the
changing shape of employment in advanced market
economies, whose importance is often overlooked.
These factors are discussed briefly next.
Role of the state as employer
In terms of direct impact on the employment structure,
perhaps the most important policy dimension relates to
the state’s role as an employer. In most Member States,
the state accounts directly or indirectly for between
15% and 35% of employment. In sectors such as health,
education and public administration, policy decisions –
whether to reduce or expand public expenditure on
such services – have a very direct bearing on the shape
of overall employment shifts, especially as labour

demand in these sectors tends to be biased towards
higher skills. In the period of peak austerity (2010–2013),
there was a very clear shift in employment growth from
public to private services and a notable contraction (of
over one million jobs or 6% of employment), in
particular, in public administration employment in the
EU (Eurofound, 2014).
Labour supply
The orthodox labour economics explanations of
changing job structure (skill- or routine-biased
technological change, or trade/globalisation) are
demand-side explanations indicating why demand for
specific types of labour, jobs and tasks in developed
economies is being altered by the impacts of new
technologies, computerisation or international
competition. But, partly in response to these changes,
the quality and quantity of labour being supplied to
employers is changing rapidly. It is reasonable to expect
that the availability of new types of worker affects the
job creation decisions of employers. Three particular
dimensions of the change in labour supply are
especially worth noting: increased female participation
in the labour market, educational upgrading, and
increasing labour mobility and migration. Why and how
are these changes related to changes in the
employment structure?
Increased female participation: Women and men tend
to work in different types of jobs. For this reason, the
majority of men and women work in sectors that are
either predominantly male (for example, construction
or manufacturing) or predominantly female (for
example, personal care or education). The increase in
female jobs can be seen particularly in the growth of the
‘care economy’ (Dwyer, 2013) as many care activities
previously provided informally within families have
been formalised in paid jobs. These include many of the
sectors (such as health and residential care) with the
highest employment growth rates in developed
economies over the last two generations and where,
due to demographic shifts, demand is forecast to
continue expanding.
Educational upgrading: Higher-skilled workers can
perform a broader variety of tasks and jobs. One of the
Europe 2020 strategic objectives is to raise the
proportion of 30–34-year-olds with a third-level degree
or equivalent qualification to 40% by 2020. In 2015, the
share was already 38.7%, up from 23.6% in 2002
(Eurostat, 2016). The availability of a sharply rising share
of highly qualified workers responds to employer
demands for specific types of labour but also induces
fresh demand itself. Oesch (2013) presented data from
4 This excludes Germany, where LFS data on the nationality or origin of respondents do not enable differentiation between EU and non-EU migrant
workers.
Employment shifts in the EU, 2011–2016
four European countries showing how the evolution of
the employment structure (in terms similar to those
used in the EJM – so in terms of the distribution of net
new employment across the wage structure) was closely
correlated with the evolution of skills supply.
Increasing labour mobility and migration: Migration
and cross-border labour mobility generate new forms of
labour supply in the destination countries. Intra-EU
labour mobility has, for example, increased, and some
12% of the EU labour force were born in a Member State
other than the one where they reside and work. The
absolute level of intra-EU migrant labour (using those
employed workers born in a country other than the
reporting country as a proxy) has increased from
5.7 million people in 2008 to 7.3 million in 2016, but this
figure is still lower than the number of workers of
non-EU origin working in the Member States
(13 million).4 Migrant labour tends, especially initially,
to work in lower-paid jobs, regardless of the
qualifications of the job-seeker or job-holder. Between
2011 and 2015, non-native employment increased in
each of the lower four quintiles in the EU, with the
strongest growth in the lowest quintile (Eurofound,
2016a, p. 11), while it decreased in each of the same
quintiles for native workers. Similarly, migrant inflows
have been the most important component of low-paid
employment growth in the UK (1991–2008) and in the
USA during the 1990s, contributing to the polarised
patterns of employment growth in both countries
(Wright and Dwyer, 2003; Oesch, 2015).
Labour market regulation
Employment protection legislation and minimum wage
legislation are particularly likely to affect the demand
for lower-paid jobs (Fernández-Macías, 2012a; Oesch,
2013). Employment deregulation has been a common
policy response to joblessness among the low-skilled
following the OECD jobs study recommendations
(OECD, 1994), and this may have contributed to
boosting employment growth in lower-paid sectors.
Labour taxation
Most labour tax codes are progressive to some extent,
with lighter tax burdens on lower-paid workers. This
may boost the supply of such workers – and possibly
demand for them, to the extent that low income tax is
accompanied by reduced levels of employer payroll or
social security contributions. Additional tax-based
incentives – such as working tax credits – operate in a
similar way, implicitly subsidising lower-paid
employment.
13
Occupational change and wage inequality: European Jobs Monitor 2017
Collective representation
Different modes of collective representation or levels of
union coverage may also play a role, particularly in their
potential to mitigate the raw impact of market forces on
decisions affecting employment. In practice, it has not
been easy to demonstrate empirically such effects
(Eurofound, 2014). In earlier work, Nellas and Olivieri
(2012) developed a model of labour demand responses
to technological change where the inclusion of
collective bargaining parameters was able to account
for the substantial differences in the growth of the
employment share of low-paid work between 1988 and
2004 in the USA (where it increased) and European
countries (where it was stable). Their conclusion was
that higher union coverage impedes the destruction of
mid-paid jobs and thereby labour supply to lower-paid
jobs. This can result in higher unemployment, as in their
model. It could also induce other more positive
outcomes, however. A specific counter-example is
Sweden, which over many decades has had a
consistently upgrading employment structure
(Eurofound, 2015a), high employment and low
unemployment as well as high levels of collective
representation.
Welfare regimes
Unemployment benefit systems indirectly establish
reservation wage levels and may thus alter the demand
for labour, again primarily for jobs at the bottom of the
wage structure. Active labour market policy is also
salient as supported employment for job-seekers is
more likely to be in lower-paid jobs. More generally,
welfare regimes channel the development of particular
types of job in different ways, with the state, the market
or the family assuming greater importance in, for
example, the provision of lower-paid interpersonal
services in, respectively, social democratic, liberal or
conservative welfare regimes (Esping-Andersen, 1990).
This has impacts on the cost and volume of formal paid
employment in these (increasingly important) services
and thereby on the evolution of employment shares
(Oesch, 2015).
Metropolitan concentration
Well-paid jobs are increasingly likely to be found in
larger cities. This is reflected in patterns of regional and
international mobility in which the overwhelmingly
favoured destinations are capital cities or larger
metropolitan areas. The two NUTS 5 regions with the
greatest inflows of residents who had moved from
another country in the preceding year were London
(197,000) and Paris (94,000) (Eurostat, 2015). Kaplanis
5 Nomenclature of Territorial Units for Statistics – a geographical nomenclature subdividing the territory of the EU into regions.
14
(2007) highlighted that patterns of employment
polarisation in the UK were regionally differentiated and
much sharper, for example, in London than in the rest of
the UK.
Inequality and consumption spillovers
Growing income inequality, related to the
disproportionate share of growth accruing to larger
metropolitan areas, may also have a role in the
changing distribution of employment across
occupations, notably via consumption spillover effects.
Increasing demand from time-poor, income-rich
workers generates fresh employment in low-skilled
services (such as in restaurants, households and
cleaning or laundry services). Mazzolari and Ragusa
(2013) estimated that ‘this channel may explain one-
third of the growth of [US] employment of non-college
workers in low-skill services in the 1990s’.
Stages of economic development
While there are common trends in the employment
structure in developed countries (principally
occupational upskilling and the service transition), not
all countries are at the same stage of development.
Processes of catch-up and convergence mean that some
countries may experience much swifter bouts of
sectoral or occupational transformation than others in a
given period. Within the EU, the share of employment in
agriculture, for example, declined in 2016 to just over
1% in the UK from 1.6% in 2000, while in Poland over
the same period, it declined from 19% to 10%.
Stages of the business cycle
Recessions are generally periods of accelerated job
destruction that affect sectoral employment
differentially. All of the net employment losses in the EU
between 2008 and 2010 were accounted for by just two
sectors – manufacturing and construction. Jaimovich
and Siu (2012) made a related point when they
demonstrated that recent employment polarisation in
the USA is largely explained by the concentrated
destruction of routine, mid-paying jobs that occurs
during recessions. The jobs that disappear do not
subsequently reappear during jobless recoveries. They
also point out that, in the USA at least, not all of this job
destruction was concentrated in manufacturing and
construction – which they describe as ‘cyclically
sensitive goods-producing sectors’ – and that it was
routine occupations in these and many service sectors
that accounted for the recessionary job attrition.

Levels of economic growth
Employment upgrading is likely to accompany stronger
output growth, to the extent that a growing share of
more productive workers should lead to greater output
(everything else being equal). This theoretical
prediction was supported by empirical evidence from
an application of the jobs-based approach to recent
employment data from the EU and six developed
economies (Eurofound, 2015a). Employment shifts were
much more likely to be upgrading in countries
experiencing periods of higher growth, for example in
Australia (2001–2010), China (2005–2010), Russia (2000–
2008) and South Korea (2001–2008), while employment
polarisation was more characteristic of countries
experiencing weaker growth (the EU, the USA and Japan
during various recent periods).
Modes of economic development
The varieties of capitalism literature list some of the
factors already cited as associated with either side of its
core differentiation between liberal market economies
(such as the UK and the USA) and coordinated market
economies (such as Germany, Japan and Sweden). Each
generates distinctive forms of comparative advantage
favouring the development of specific sector
specialisations – manufacturing in the case of
coordinated market economies and services,
information technology and new technology in the case
of liberal market economies (Hall and Soskice, 2001).
The literature on the ‘service transition’ also assimilates
similar distinctions to explain why countries are
converging at different speeds on a higher share of
service activities in overall employment and output
(Wren, 2013).
Some of the above can be considered drivers of change
(for example, the role of the state as employer), while
many of the others are contextual factors – welfare
regimes and rate or stage of economic growth – that
influence the contours of employment change, making
them, for example, more obviously upgrading or more
obviously polarising. Crucially, these drivers and
contextual factors vary significantly between countries
and across time, even among a subset of relatively
homogenous, developed western European EU Member
States (Eurofound, 2015a). For these reasons, even if
aggregate EU employment displays some consistency in
its shifts over time, notably as regards the persistent
outperformance of top-quintile jobs in employment
growth and relative decline of mid-paid jobs, one would
Employment shifts in the EU, 2011–2016
expect much variation between countries. As the next
section indicates, this is what is found for the period
2011–2016 and what earlier EJM analysis has
documented going back to the mid-1990s.
Recovering labour markets
The employment recovery post-2013 is now well
established, with eight million net new jobs created
across the EU. In Figure 6, this is evident in the
predominance of positive employment growth by
quintile and country in the 2013–2016 period (orange)
compared with the earlier period of 2011–2013 (blue),
the period of double-dip recession.
At EU aggregate level, net employment gains after 2013
have been more broadly shared across the quintiles,
though with a customary skew to higher-paid jobs.
Around 2.7 million of the net job creation since 2013 has
been in well-paid, top-quintile jobs, but there have also
been gains of between 830,000 and 1.6 million jobs in
each of the remaining quintiles. During 2011–2013,
employment contracted in all quintiles except the top
quintile. Employment growth has, in effect, spread
down the wage distribution during the recovery,
consistent with a consumption-led recovery raising
demand in particular for lower-level, non-tradeable
services in most recent years (European Commission,
2016).
This is clearly observed in some Member States –
Austria, the Czech Republic, Denmark, Hungary,
Lithuania, the Netherlands and the UK. It is also a
pattern observed in several of those Member States
where the recession hit hardest. For Cyprus, Greece and
Spain and, to a lesser extent, Ireland, significant
contraction of employment persisted after the peak
crisis years (2008–2010) right through until 2013. This
job loss tended to have a strong concentration in mid-
paying jobs, attributable in substantial part to a
continuation of the rapid contraction of manufacturing
and construction sector employment that had occurred
in 2008–2010. Since 2013, each of these countries has
experienced employment growth above the EU average.
These gains have tended to occur in the middle
quintiles, but with the bulk of the gains occurring
somewhat further down the wage distribution. This
suggests that while some of the gains may result from
rebounds in the strongly recession-affected sectors,
much of the net new employment created most recently
is in different, lower-paid jobs. This is most clearly the
case in Ireland.
15
Occupational change and wage inequality: European Jobs Monitor 2017

Figure 6: Employment change (in thousands) by job-wage quintile, Member States, 2011 Q2–2016 Q2

Austria Belgium Bulgaria Croaa Cyprus Czech Republic

100 50 40 50 10
100
20
50 0 0
50
0 0
0 -50 -10 0
-20
-50 -50 -40 -100 -20 -50

Denmark Estonia Finland France Germany Greece

50 30 20 200 600 100

20 100
0 400 0
0 10 0
-20 200 -100
0 -100
-50 -10 -40 -200 0 -200

Hungary Ireland Italy Latvia Lithuania Malta

40 25 30 6
150 300
150 20
20 3
100
0 0 10
50 0 0
-150 0

0 -20 -300 -25 -10 -3

Netherlands Poland Portugal Romania Slovakia Slovenia

80 300 200 200 60
60 200 20
100
100 0 40
40
0 0
20 0
-100 -200 20
0 -100
-200
-20 -300 -200 -400 0 -20

Spain Sweden UK EU
500 150 600 3,000

100 400 2,000

0 50 200 1,000

0 0 0

-500 -50 -200 -1,000

2011–2013 2013–2016

Notes: Data for Germany are for 2012 Q2–2016 Q2; data for the Netherlands and Slovakia are not available for 2011 Q2–2013 Q2. See Annex 2 for
treatment of data breaks in France, Germany, the Netherlands and Slovakia. Luxembourg is excluded for data reasons.
Source: EU-LFS, SES (authors’ calculations)

There is clearly no dominant pattern of employment
shift over the two periods covered, as might be inferred
also from the divergent labour market performances of
Member States over recent years. The aggregate EU
pattern is upgrading with some polarisation.
Those more populous Member States with significant
positive employment growth in recent years each
demonstrate clear upgrading patterns – Germany,
Poland and the UK. Around 60% of top-quintile
employment growth in the EU since 2013 occurred in
these three Member States; they also accounted for
around half of total net employment growth. Other
unambiguously upgrading countries included Sweden
(2011–2016) and Portugal (2013–2016).
In Belgium, employment growth was polarised in both
periods (2011–2013 and 2013–2016), occurring only in
the top and bottom wage quintiles. In Austria, the Czech
Republic, Denmark and Romania, recent (post-2013)
growth has been polarised, whereas the most clear
examples of employment polarisation in the 2011–2013
period arose in those countries that experienced the
sharpest recessions in the wake of the global financial
crisis, where the recessionary impacts persisted through
to 2012–2013, and where associated employment
destruction was concentrated in mid-paying jobs
(Greece, Portugal and Spain). As already indicated, the
recent rebound of employment in some of these
Member States (Greece and Spain) has tended also to
occur in mid-paying or mid-low-paying jobs, leading to
distinctive ‘growth in the middle’ employment shifts.
A small number of Member States show downgrading
patterns of employment shift since 2013, with greater
growth occurring at the bottom of the wage
distribution. Hungary, Ireland, Latvia and the
Netherlands are the clearest examples of this, while in
Italy and Malta, employment growth has been strongest
throughout 2011–2016 in the lowest-paying jobs.
Downgrading patterns of employment growth have also
been observed in the US labour market recently, with
relatively stronger growth in the lower part of the wage
distribution in the period 1999–2012, accompanied by
relatively stagnant growth in the middle and top of the
wage distribution (Autor, 2015, p. 20). More generally, in
the longer term, jobs-based patterns of employment
change in the USA have tended to shift from
unequivocally positive upgrading (in the 1960s) to more

16
 Employment shifts in the EU, 2011–2016

polarised patterns each decade until the 1990s (Wright
and Dwyer, 2003). This is obviously a development that
warrants monitoring, all the more so as none of the
more orthodox, demand-based theoretical accounts of
how developed economy labour markets are changing
offers an explanation for such observed downgrading. It
is worth recalling also that earlier diagnoses of
employment polarisation related first to the USA (Autor
et al, 2003) before emerging in relation to the UK (Goos
and Manning, 2007) and other EU Member States (Goos
et al, 2009); the USA can be a harbinger of developments
in other developed market economies including the EU.
Thus far, a similar pattern can be observed only in a
small number of Member States and over a shorter 3–5
year time frame. Aggregate employment shifts in the EU
continue to be skewed towards top-quintile growth,
albeit with a strengthening since 2013 of growth in
lower-paid employment.
In many countries, employment shifts do not conform
to any obvious pattern, are irregular or are some hybrid
of the four patterns already indicated. This is partly due
to the short time frame covered. Structural changes
generally take longer than three or five years to become
apparent. But a second general conclusion based on
Figure 6, supported by previous jobs-based analysis
carried out over longer time frames (Oesch, 2013;
Eurofound, 2015a), is that there has been a variety of
different employment shift patterns in different
countries.
Growing and declining jobs
The quintile charts compress a lot of data in order to
convey graphically the main employment shift patterns.
They do not, however, identify the individual jobs
(again, as defined in this study’s application of the jobs-
based approach, occupations in sectors at two-digit
level of detail using the ISCO and NACE classifications)
that contribute to the overall pattern. Depending on the
country, each quintile encompasses between 80 and
300 plus jobs. In practice, a small number of large-
employing jobs account for a very large share of
employment. It is shifts in the employment headcount
in these jobs that contribute most to the observed
patterns of change in the quintile charts. Table 2 lists, in
sequence, the top 12 jobs in terms of employment in the
EU as well as those large-employing jobs (employing
more than 600,000 people in the EU28 in 2016, n = 57)
with the fastest rates of growth or contraction in 2011–
2016. Details are also included of the composition of
employment in these jobs by gender, age and share of
part-timers.

Table 2: Top 12 jobs by employment (2016 Q2) and top 12 fastest-growing and fastest-declining
large-employing jobs (2011 Q2–2016 Q2), EU

Largest-employing jobs Employment Employment composition (%) Job quintile

Average
2016 annual % Age 55+ Age <30
Occupation Sector (millions) growth Female years years Part time W E JQ
Sales workers Retail trade 12.2 0.3 70 14 29 34 1 2 3
Teaching professionals Education 9.8 0.6 71 21 12 22 5 5 5
Skilled agricultural workers Crop and animal 6.2 -2.6  36 32 13 17 2 1 2
production, etc.
Health professionals Human health activities 4.9 2.0 70  24 14 22 5 5 4
Personal services workers Food and beverage service 4.4 2.7 53 9 41 35 1 2 1
activities
Drivers and mobile plant Land transport and 4.1 0.1 5  23 10 8 3 2 1
operators transport via pipelines
Building and related trades Specialised construction 4.0 -2.2 2 15  19 7 2 2 2
workers activities
Health associate Human health activities 3.8 0.5 82  16 22 28 4 4 3
professionals
Business and administration Public administration and 3.1 -0.2 60 22 11 16 4 4 5
associate professionals defence
Building and related trades Construction of buildings 2.3 -1.3 1 15  15 5 3 1 1
workers
Cleaners and helpers Services to buildings, etc. 2.2 2.9 78  23 12 64 1 1 1
Personal services workers Other personal service 2.1 2.1 85 12  28 32 1 3 3
activities

17
Occupational change and wage inequality: European Jobs Monitor 2017

Fastest-growing large-employing jobs Employment Employment composition (%) Job quintile

Average
2016 annual % Age 55+ Age <30
Occupation Sector (millions) growth Female years years Part time W E JQ
ICT professionals Computer programming, 1.6 7.0  15 8 21 7 5 5 5
consultancy, etc.
Legal, social and cultural Education 1.0 6.1  79 16 27 46 3 4 3
associate professionals
Drivers and mobile plant Warehousing and support 0.6 5.8 4  20  15 5 3 2 1
operators activities
Business and administration Activities of head offices; 0.7 4.6 44  22 13  18 5 5 5
professionals management consultancies
Health associate professionals Residential care activities 0.6 4.5  84  19  23  35 2 4 3
Food preparation assistants Food and beverage service 1.1 3.8  59 11 41 53 1 1 1
activities
Legal, social and cultural Legal and accounting 1.1 3.2  47  19 11 9 5 5 5
professionals activities
Stationary plant and Manufacture of food 0.8 3.2 42  14 22  8 2 1 1
machine operators products
Business and administration Financial service activities 0.7 3.1 49 9 19 8 5 5 5
professionals (excluding insurance)
Personal care workers Residential care activities 2.0 3.1 87  20  22  40 2 3 3
Cleaners and helpers Services to buildings and 2.2 2.9 78  23 12 64 1 1 1
landscape activities
Personal services workers Accommodation 0.9 2.8  56 15 31 26 2 2 2

Fastest-declining large-employing jobs Employment Employment composition (%) Job quintile

Average
2016 annual % Age 55+ Age <30
Occupation Sector (millions) growth Female years years Part time W E JQ
Hospitality, retail and other Food and beverage service 0.9 -2.8 40 19 15 7 3 3 3
services managers activities
Metal, machinery and Manufacture of fabricated 1.6 -2.8 4 18 21 4 3 2 1
related trades workers metal products
Skilled agricultural workers Crop and animal 6.2 -2.6  36 32 13 17 2 1 2
production, etc.
Hospitality, retail and other Retail trade 0.7 -2.6  49 16 15 6 4 3 4
services managers
Customer services clerks Financial service activities 0.9 -2.2 63  16  24  22 4 4 4
(excluding insurance)
Building and related trades Specialised construction 4.0 -2.2 2 15  19 7 2 2 2
workers activities
General and keyboard Public administration and 1.3 -2.2 74  26 9 19 3 3 4
clerks defence
Cleaners and helpers Education 0.6 -1.8 87  32 4  34 1 1 2
Cleaners and helpers Activities of households as 1.4 -1.7 95  26  7 68 1 1 1
employers
Sales workers Wholesale trade 1.0 -1.6 43 15 20 18 3 3 4
Building and related trades Construction of buildings 2.3 -1.3 1 15  15 5 3 1 1
workers
Agricultural labourers Crop and animal 1.3 -1.0  33  18 23  28 1 1 1
production, etc.

Notes: EU28, 2016 Q2 data for top 12 jobs by employment; also for employment composition estimates. For individual Member State shares of
employment for each of the top 12 jobs, see Annex 5. Figures for average percentage growth per annum are based on the average yearly growth
rate for different EU aggregates due to data breaks in certain countries, as follows: 2013–2016, EU26 (no data for France or Luxembourg);
2012–2013, EU24 (no data for France, Luxembourg, Slovakia or the Netherlands); 2011–2012, EU23 (no data for France, Luxembourg, Slovakia,
the Netherlands or Germany). Red arrows indicate declining share by at least 2 percentage points; green arrows indicate increasing share by at
least 2 percentage points (over period 2013–2016, EU26 (no data for France or Luxembourg)). Job quintiles: W = wage, E = education, JQ = job
quality (see Eurofound 2013 annexes for details of construction).
Source: EU-LFS, SES (authors’ calculations)

18

The top 12 jobs account for over a quarter (26%) of all
employment in the EU, with the two biggest jobs – retail
sector sales workers and education sector teaching
professionals – accounting for 1 in 10 jobs. Employment
has grown modestly in these two predominantly female
jobs, the former in the lowest job-wage quintile and the
latter in the highest. Of the other largest-employing
jobs, the biggest contractions in headcount were in
skilled agricultural workers (-2.6% per annum) as well as
two construction sector jobs. However, more jobs were
growing than contracting in the top 12 list (8 versus 4),
and more of these jobs were growing relatively fast
(more than 2% per annum) than declining relatively
fast.
The greatest employment growth was recorded in three
low-paid jobs: cleaners and helpers in the services to
building sector; personal services workers in food and
beverages; and personal services workers in other
personal services activities. These jobs account for
much of the recent bottom-quintile employment
growth. They are typical, basic-skilled service jobs, that
are hard to automate and where the service is provided
directly in person. They are also predominantly female-
employing jobs, with a high share of part-timers.
In the two lists of relatively fastest-growing and fastest-
contracting large jobs, one can see that the archetypal
modern digital economy job – ICT professional in
computer programming – is the fastest-growing job
(+7% per annum). There are four well-paid, top-wage-
quintile jobs in the fastest-growing list but none in the
fastest-declining list.
While these top-growing jobs contribute to employment
upgrading, they do so only modestly, given their
relatively low employment headcount. There are 1.6
million ICT professionals in computer programming and
fewer still in the other top-quintile professional job
Employment shifts in the EU, 2011–2016
categories with fastest growth. In general,
developments in both the fastest-growing and fastest-
contracting jobs are likely to contribute more to
employment polarisation. Ten of the fastest-growing
jobs are in the low-paid, mid-low-paid or top-paid
quintiles, while the fastest-contracting jobs are in the
middle of the wage distribution.
The fastest-growing jobs are, however, growing faster
than the fastest-declining jobs are contracting; the
annual growth rate of personal services workers in
accommodation (12th in the fastest-growing jobs list) is
of the same magnitude (2.8% per annum) as the rate of
contraction of the fastest-declining jobs (hospitality
managers in food and beverages and trade workers in
fabricated metal products production).
In terms of job composition, as already indicated, the
main aggregate shifts are the increasing share of
employment accounted by female workers, older
workers and part-timers. Among the top-growing and
top-declining jobs, the most obvious compositional
change is the increasing share of older workers,
especially in the fastest-growing jobs. This suggests that
older workers in these jobs are remaining longer in work
and retiring later. Some fast-growing, predominantly
female jobs are becoming less female (for example,
health associate professionals in residential care), while
the very male-dominated job of ICT professionals in
computer programming is attracting a growing share of
women. Finally, it is interesting to see that in four of the
top-growing jobs, the share of part-timers is declining.
One manifestation of increased demand may have been
the conversion of existing part-time positions to full-
time positions as the employment recovery has
strengthened. If this is the case, some share of the part-
time pool in such jobs may be functioning as a labour
reserve.
19
3 Patterns of employment change
by sector, employment status
and worker characteristics
In this chapter, employment change is broken down
into its components in terms of major sectoral
aggregations, employment status and worker
characteristics. The objective is to show how the broad
outlines of employment change identified in the quintile
charts intersect with other dimensions of labour market
development, such as the increasing share of services in
total employment, the rapid recent growth in part-time
work and the increasing share of female employment.
Developments by broad sector:
The service transition
Over many generations in developed market
economies, employment has tended to decline in
primary sectors (agriculture and mining) and secondary
sectors (manufacturing), with a corresponding increase
in the share in tertiary, service sectors. This has
occurred largely as a result of differential rates of
productivity growth. The application of successive
waves of productivity-enhancing and labour-saving
technology in farming and in production has automated
many processes and allowed greater output to be
generated with fewer and fewer workers. Many service
activities are labour intensive and do not have the same
potential productivity improvements because they
involve tasks that are hard to automate and that
continue to require direct human intervention – think,
for example, of a haircut, the preparation of a meal or
an examination by a doctor. Employment needs in
modern economies are therefore increasingly satisfied
by a growing service sector. Over 70% of EU
employment is now in services, and in the most service-
intensive countries such as Luxembourg or in large
metropolitan areas such as greater London or the Île-
de-France, the figure is between 80% and 90%.
Many of the consequences of ‘unbalanced’ sectoral
growth were first identified in the 1960s (Baumol, 1967;
see Nordhaus, 2006 for a more recent assessment).
These included decreasing relative costs and
employment in technologically progressive sectors such
as manufacturing, and increasing relative costs and
employment in ‘technologically stagnant’ service
sectors. ‘Baumol’s cost disease’ is probably an
important factor in declining rates of output growth and
in predictions of ‘secular stagnation’ in developed
market economies. The composition of paid
employment has increasingly shifted to sectors and jobs
in which it is harder to increase productivity. And even
the application of the formidable advances in
information technology to services sector work
processes has brought about relatively modest
improvements in output. As Nobel Laureate economist
Robert Solow has observed, ‘we see computers
everywhere except in the productivity statistics’.
This may, however, be about to change. Recent
developments in education (for example, massive open
online courses), telemedicine, domestic robots and
driverless transport suggest that the application of
technology may revolutionise the provision of services
that have traditionally been provided personally. This
could augur declining labour demand in some high-
employing service sectors. But for the moment, this is
not occurring in developed-economy labour markets. In
structural terms, employment headcount is continuing
to grow, especially in services, even as the working age
population has begun to contract post-2010.
The long-term secular shift to services employment
tended to pick up pace during the post-2008 economic
crises as the negative employment impacts of the crises
fell disproportionately on non-service sectors. Despite
the aggregate net loss of 7.5 million jobs in the EU in the
period 2008–2013, the service sector actually grew
employment during the period (+0.25% per annum).
Manufacturing and construction alone accounted for
the net destruction of 8.6 million jobs during 2008–2013.
Since the employment recovery in 2013, the average
growth rate in services employment has been 1.6%.
Figure 7 highlights again the pivot in terms of
employment performance from the earlier post-
recession period (2011–2013) and the employment
recovery (2013–2016). Only the top quintile grew
employment in 2011–2013; there has been growth in all
quintiles since 2013, and the bulk of new employment
has been in the service sector, which has been – relative
to earlier periods – quite evenly distributed across the
job-wage distribution.
The same year – 2013 – marks a point of inflection for
the other broad sectors presented. Employment losses
in the primary sector – agriculture and the mining and
extractive industries – have actually increased post-
2013 even as the recovery has strengthened. These
losses have been in low-paid agricultural jobs almost
exclusively and with a strong concentration in a smaller
number of Member States that have comparatively
21
Occupational change and wage inequality: European Jobs Monitor 2017

Figure 7: Employment shifts (in thousands) by job-wage quintile and broad sector, EU, 2011 Q2–2016 Q2

2011–2013 2013–2016

2,500 2,500

1,500 1,500

500 500

-500 -500

-1,500 -1,500

Services Construcon Manufacturing and ulies Primary sector

Source: EU-LFS, SES (authors’ calculations)

large agricultural workforces, such as Croatia, Greece, growing manufacturing jobs are in professional,
Poland, Portugal and Romania. associate professional or managerial grade
occupations, with the strongest growth in machinery
As regards the construction and manufacturing sectors,
and equipment production and motor vehicle
even if the majority of post-crisis employment losses
production. Employment levels of science and
occurred during the earlier ‘peak crisis’ period 2008–
engineering professionals in motor vehicle
2010 (not shown), both sectors continued to shed
manufacturing (NACE 29), for example, have been rising
employment through to 2013. In contrast, there has
by 7% per annum since 2013. At the same time, there
been positive growth since 2013 in both sectors, very
has also been growth in traditional blue collar
marginally so in construction, but much more robustly
production roles such as stationary plant and
in manufacturing, where the annual employment
machinery operators and assemblers, again in the
growth rate since 2013 has been only slightly lower than
faster-growing machinery and motor vehicle production
in services (1.4% versus 1.6%). In both sectors, net new
sectors.
employment has been skewed to better-paid jobs.
Manufacturing employment in the EU has not only been
In manufacturing, this has arisen in part from a
changing qualitatively but also has been shifting
recomposition of employment towards higher-skilled
geographically. Figure 8 focuses on manufacturing
professional roles. Manufacturing employment is
employment shifts and differentiates between the ‘old’
upgrading: the employment lost mainly in mid-paying
EU15 Member States and the primarily eastern
jobs up to 2013 is being replaced by higher-skilled and
European Member States that joined the EU after 2004
higher-paying employment. Eight of the top 10 fastest-
(the EU13).

22
 Patterns of employment change by sector, employment status and worker characteristics

Figure 8: Employment shifts (in thousands) by job-wage quintile in manufacturing, EU15 and EU13,
2011 Q2–2016 Q2

2011–2013 2013–2016

500 500

0 0

-500 -500

EU15 EU13 EU15 EU13

Source: EU-LFS, SES (authors’ calculations)

Most employment losses in the earlier 2011–2013 period
were recorded in the EU15. During the recovery, around
60% of the net 1.5 million new manufacturing jobs
created in the EU have been in the EU13, even though
these countries account for just over a quarter of the
total EU manufacturing workforce. It is also worth
noting that the growth in EU15 manufacturing
employment has been mainly in high-paid jobs, while
that in the EU13 has been more evenly distributed
across the top four quintiles, with a skew towards mid-
paid jobs. One likely explanation is that some
‘traditional’ blue collar, mid-paying manufacturing jobs
– of the type that were cut in the older Member States
with a higher GDP during the recession – have relocated
eastwards following the recovery, as primarily western
European companies take advantage of lower labour
costs in the eastern European Member States. Such an
explanation is consistent with patterns of employment
gains and losses arising from restructuring activity
captured by the European Restructuring Monitor in
recent years (Eurofound, 2017), especially in the two
manufacturing subsectors that have contributed most
to the recent manufacturing ‘renaissance’ – the motor
vehicle production and machinery and equipment
production sectors.
The contribution of manufacturing to overall
employment growth pales beside that of the service
sectors. These have added over eight million new jobs
since 2011, the majority of the job gains occurring after
2013. Consistent with a consumption-led recovery, a
large share of this new employment has come in less-
knowledge-intensive services 6 – jobs such as personal
care workers or service workers in the food and
beverages sector. These account for most of the growth

6 This breakdown relies on the Eurostat aggregation of service sectors into knowledge-intensive services (KIS) and less-knowledge-intensive services (LKIS).
As there is no specific question in the EU-LFS regarding the public or private status of the respondent’s employer, it is not possible to estimate accurately
the respective shares of public and private sector services employment. To make the distinction in this report, the KIS category has been further broken
down into public and private service components. Public KIS comprises the following NACE sector categories: public administration; social security and
defence; education; and human health activities. Private KIS comprises all remaining knowledge-intensive services (see Annex 4 for a full list). It should be
noted that, as a significant minority of workers in the health and education sectors are in fact private sector employees, the public KIS category is an
imprecise proxy of public sector employment.

23
Occupational change and wage inequality: European Jobs Monitor 2017

in the bottom two quintiles in Figure 9. There has also

been a reprise of growth in the predominantly public
sector knowledge-intensive service employment,
notably in the top quintile, as public spending
restrictions were relaxed after 2013. As noted in Table 2,
employment growth has been particularly strong in the
category of health professionals. Knowledge-intensive
services in the private sector – including media, ICT,
consulting, legal and accounting services as well as
financial services – account for around half of the
growth in well-paid, top-quintile jobs but only modestly
for growth in the other quintiles. All four of the top-
quintile fastest-growing large jobs (see Table 2) fall into
this category, including that of ICT professionals in
computer programming and consultancy.
Figure 9: Employment shifts (in thousands) by
job-wage quintile in services, EU, 2011 Q2–2016 Q2
3,000
2,000
1,000
0
Private KIS LKIS Public KIS
Note: KIS = knowledge-intensive services; LKIS = less-knowledge-
intensive services.
Source: EU-LFS, SES (authors' calculations)
Atypical employment growing
across the wage distribution
One effect of the 2008–2013 crises was to reduce the
share of European workers in full-time permanent
dependent employment. This traditional status –
henceforth referred to as ‘core employment’ status in
this report – described 58.2% of EU workers in 2016 Q2
(compared with 59.5% in 2009). In particular, there was
a steady expansion of part-time work even as the
numbers of those in full-time work decreased. As the
recovery in EU labour markets has broadened since
2013, a (very modestly) growing share of net new
employment has been in core employment status. This
is consistent with greater confidence among employers
as economic conditions and prospects have improved.
Member State labour markets show a great diversity in
terms of the shares of core employment and of the
distribution of non-core employment between those
who are self-employed, on temporary contracts,
working part-time or some combination of these
categories. For example, just over one in three Dutch
workers has core employment status; this country’s
very particular experiment in flexibilised working time
has resulted in there being more part-timers than full-
time workers. In recent years, an increasing number of
self-employed workers in the Netherlands has added
another vector of destandardisation. While most
western European EU15 Member States have shares of
core employment close to the EU28 average
(±5 percentage points), the percentages tend to be
much higher in the EU13 countries (70%–85% in most
cases),7 although here, too, they are in decline. The
incidence of part-time work in particular tends to be
much lower in eastern European Member States.
In summary, the main vector of destandardisation has
been the increasing share of part-time employment.8
At aggregate EU level, shares of temporary work and
self-employed are not much changed since 2008.

7 Poland is the exception with its very high share of temporary workers.

8 This analysis relies on the LFS’s main variables capturing employment status. These differentiate between full-time and part-time work (ftpt), self-
employment and dependent employee status (stapro), and between those dependent employees with a permanent contract and those with a temporary
one. However, a weakness can be noted in any analysis of ‘atypicality’ or employment destandardisation that relies on these distinctions. It is increasingly
obvious that some emerging forms of employment relationship (for example, online platform workers, on-call workers or those working zero-hours
contracts in the UK) are not directly identifiable using the available LFS variables. Many online platform workers are likely to be part time, but it is only
now in some cases that labour law is being called on to arbitrate whether, for example, a taxi driver operating on a particular taxi-service platform is self-
employed or an employee of the platform provider. Even where such distinctions may have acquired legal clarity, an additional complication with the LFS
data – as with all surveys – is that it is based on individual survey responses, and respondents in similar situations may report differently on their own
status.

24

Core employment share
stabilising
Figure 10 breaks down recent EU employment growth
by job-wage quintile for core workers (those on full-time
permanent contracts) and various forms of ‘atypical’
worker 9 (those who work part time or on full-time
temporary contracts or who are full-time self-
employed). The analysis compares the period of
ongoing job loss (2011–2013) with the recovery period
(2013–2016); the reference category is core workers
(represented by a dark blue bar in Figure 10). The two
periods are quite different, not only in terms of the sign
of the employment shifts, but also in the shifts by
employment status.
The period 2011–2013 saw a destandardisation of
employment. This was a continuation of developments
previously observed in 2008–2010 (Eurofound, 2011).
The main elements of this were a net decrease of full-
time employment in all except the top quintile, partly
compensated for by an increase in part-time
employment in all quintiles. While core employment
Figure 10: Employment shifts (in thousands) by job-wage quintile and employment status, EU, 2011 Q2–2016 Q2
2011–2013
2,500
1,500
500
-500
-1,500
Permanent, full me
Source: EU-LFS, SES (authors’ calculations)
9 Family workers are omitted from the description of employment shifts by core/non-core employment status; these accounted for just over 1% of the total
EU workforce (2.46 million people) in 2016 and are in decline.
Patterns of employment change by sector, employment status and worker characteristics
accounted for the majority of job losses, there was also
a broadly shared decline in temporary employment
(usually the most vulnerable category in a downturn)
and also of self-employment in mid-paid and mid-low-
paid jobs (mainly in agriculture and likely to be
structural).
After 2013, as labour market conditions improved, the
share of core employment has stabilised. Core
employment status has been the category accounting
for the biggest share of employment growth in each of
the quintiles, though only in well-paid, top-quintile jobs
does it account for the majority of net new employment.
Part-time employment continues to grow across the
wage distribution, and there has been an across-the-
board increase in temporary employment – a customary
labour market response in conditions of recovery. While
self-employment accounts for only a small share of net
new employment, it is interesting to see that this is very
clearly skewed towards high-paying jobs such as
professionals in the health, education, and legal and
accounting services as well as in the fast-growing
category of ICT professionals.
2013–2016
2,500
1,500
500
-500
-1,500
Self-employed, full me Temporary, full me Part me
25
Occupational change and wage inequality: European Jobs Monitor 2017

Figure 11: Employment shifts (in thousands) by job-wage quintile in core and non-standard forms of work,
selected Member States, 2011 Q2–2016 Q2
Finland Spain
20 200

0 0

-20 -200

-40 -400

UK Sweden
1,000 200

800
150

600
100
400

50
200

0
0

-200 -50

Permanent, full me Self-employed, full me Temporary, full me Part me

Source: EU-LFS, SES (authors’ calculations)

Trends in temporary employment and core
employment outside the top quintile have tended to be
sensitive to the business cycle. The more obviously
structural trends are the growth of part-time
employment and core employment in the top quintile;
this has been consistent through periods of
employment contraction and expansion alike. Similar
conclusions can also be drawn based on earlier EJM
analyses looking at the pre-crisis period (1998–2007)
and the peak crisis period (2008–2010) (Eurofound,
2011, 2013). Part-time employment levels have grown
consistently since 2008, even in periods of steep
recession, while full-time employment has tended to
grow only in periods of relatively higher growth.
Different manifestations of these developments can be
seen in Figure 11 in four Member States with quite
different recent economic and labour market
performance.
In Finland and Spain, where there was a net destruction
of employment in 2011–2016, most of the job loss has
been in core employment while there have been some
countervailing gains in atypical work – predominantly
part-time work in Spain and self-employment in
Finland. In contrast, where workforces have been
growing, these gains have either been primarily in core
employment status in higher-paid jobs – as in Sweden –
or have been shared between core and atypical
employment – as in the UK, where increasing self-
employment, in particular, has contributed to growth at
the top.10

10 Indeed, the rapid rise of self-employment in the UK – from around 4 million workers in 2011 to 4.8 million in 2016 – is the main factor behind the rise of
self-employment in the EU overall.

26
 Patterns of employment change by sector, employment status and worker characteristics

Figure 12: Employment shifts (in thousands) by job-wage quintile and full-time and part-time status, according to
gender, EU, 2011 Q2–2016 Q2

Men Women

1,500 1,500

1,000 1,000

500 500

0 0

-500 -500

Full me Part me Full me Part me

Source: EU-LFS, SES (authors’ calculations)

Last year’s EJM analysis concluded that the core quintile. Part-time employment has also grown very
employment relationship – with its customary benefits in significantly for men over recent years, but this growth
terms of greater contractual security, career has been strongest in low-paid service jobs, including
advancement possibilities and full-time earning capacity many jobs which, to date, have been mainly female-
– was increasingly the privilege of those in well-paid jobs employing, such as retail sales assistants and personal
(Eurofound, 2016a). The addition of one year of services workers in the food and beverages sector.
reasonably vigorous employment growth has largely
One potential explanation is that male workers who lost
qualified this conclusion. Core employment has
their jobs in the manufacturing and construction sectors
accounted for much of the recent growth across the wage
during the crises have subsequently taken up generally
distribution, although still with an upgrading skew
lower-paying service jobs. While such a hypothesis is
towards higher-paid jobs. And atypical employment is
not possible to test using cross-sectional data, Salvatori
tending to grow across the wage distribution and not just
observed in relation to the UK labour market that ‘the
in lower-paid jobs, as atypical employment forms such as
decline in middling occupations is entirely accounted
part-time work and self-employment appear to be
for by non-graduates, who have both decreased in
‘normalising’ even in higher-skilled, higher-paying jobs.
numbers and seen their employment become more
concentrated at the bottom’ (2015, p. 12).
Growing male share of part-time
work Non-natives dominate new
At first glance, it may be surprising that net new part- employment in lower-paid jobs
time employment – in both periods – is so evenly spread
Just over 27 million workers in the EU (12% of the total)
across the job-wage quintiles. Part-time work is
were born in countries other than the countries in which
associated with a wage penalty, and part-time
they work. Since the majority of this subgroup was born
employment is skewed towards the lower quintiles. The
in non-EU countries, a minority is mobile EU workers
main explanatory factor is gender, as Figure 12
taking advantage of the freedom of movement that EU
illustrates. This covers the whole period from 2011 to
citizens enjoy to settle and work in other Member
2016 and breaks down employment shifts by gender
States. The mobile/migrant worker population has
and full-time versus part-time status. There are
increased by over three million since 2011 and thus
increasing numbers of part-time professionals,
accounts for just less than half of net employment
particularly in the health and education sectors, and, in
growth over the last five years, although, as the recovery
line with the overall gender share of employment in
has become more established in 2015–2016, the share
these sectors, these are primarily female jobs. These
of net new employment held by natives has risen
have supported the growth in part-time work in the top
sharply.

27
Occupational change and wage inequality: European Jobs Monitor 2017

Figure 13: Employment shifts by job-wage quintile As can been seen from Figure 13, most of the net
and country of birth, EU, 2011 Q2–2016 Q2 employment growth in the bottom three quintiles in the
EU is accounted for by non-natives. In these low-paid
4,000 and mid-paid jobs, native employment has either
increased only marginally (first quintile) or has
contracted. Meanwhile, natives have been the main
beneficiary of the more resilient employment growth in
better-paid jobs and especially in top-quintile jobs. At
aggregate EU level, therefore, developments in native
2,000 employment tend to be more upgrading while those in
non-native employment contribute to employment
polarisation by bolstering growth at either end of the
wage distribution.
Around half of the growth of migrant employment is
0 accounted for by Germany where, for historical reasons,
the LFS does not record the different categories of the
country of birth variable but instead assigns all
respondents not born in Germany to a ‘No answer’
category. This category has grown by some 1.2 million
since 2011 and is likely to comprise a high share of non-
-2,000 EU migrants, given the nature of recent immigrant flows
Reporng country EU13 non-nave to Germany. The other big increases in non-native
EU15 non-nave Non-EU employment were for EU13 non-nationals, which now
account for the majority of EU mobile workers, and non-
No answer
EU nationals. Each of these groups grew by around one
Source: EU-LFS, SES (authors’ calculations) million workers. The numbers of mobile EU workers

Figure 14: Employment shifts (in thousands) by job-wage quintile and country of birth, selected Member
States, 2011 Q2–2016 Q2
Denmark Sweden UK
100 200 1,000

80 150

60 100

40 50 500

20 0

0 -50

-20 -100 0

Italy Ireland Spain

100 100
500

80
0
300
60

40 -100
100

20
-200
-100
0

-20 -300
-300

Reporng country EU13 non-nave EU15 non-nave Non-EU No answer

Source: EU-LFS, SES (authors’ calculations)

28
 Patterns of employment change by sector, employment status and worker characteristics

from EU15 Member States were relatively stable,
increasing by around 200,000 over the five-year period.
As has been the case for over a decade, intra-EU labour
mobility flows have been predominantly east–west,
from countries with lower GDP per head to countries
with higher GDP per head, but these EU13 mobile
workers are more likely to be working in lower-paid jobs
compared with their EU15 counterparts.
The non-native working population is highly
concentrated in older Member States; it accounts for
only a marginal share of employment in eastern
European Member States such as Bulgaria, the Czech
Republic, Hungary, Romania and Slovakia. But 15% of
workers in Austria, Cyprus, Germany, Ireland,
Luxembourg, Sweden and the UK are non-natives.
In all large host countries except Spain, there has been
an increase in the levels of non-native employment. On
the top row of Figure 14, the patterns of native and non-
native employment growth in Denmark, Sweden and
the UK are similar to those observed in the EU as a
whole (Figure 13); non-natives account for most or all of
the growth in the lower three wage quintiles but also
contribute to growth at the top of the wage distribution,
where high demand for certain professional
qualifications is met by supply from internationally
mobile workers. For example, non-natives accounted
for a majority of the employment increase in the fastest-
growing, well-paid (top-quintile) job in the UK, that of
ICT professionals in computer programming. Native
employment shifts in these countries have also been
strongly upgrading with nearly all of the net gains
concentrated in the top two quintiles.
In Italy, where most employment growth has been in
low-paid jobs, it is non-natives that have largely
accounted for this growth, and they have also been an
important factor in growing low-wage employment in
Ireland. The travails of the Spanish labour market have
affected both natives and non-natives alike, notably
non-EU workers – mainly those from other Spanish-
speaking countries that arrived to work in the pre-crisis
boom and who subsequently have either become
unemployed or left the country. But as employment
levels have increased in Spain so too has its non-EU
non-native working population – by some 230,000 since
2014.

Summary
£ During 2013–2016, employment levels in the EU have exhibited their first sustained increase since the global
financial crisis. There were eight million more people at work in 2016 Q2 compared with three years
previously, and newer jobs are increasingly likely to be full time rather than part time.
£ The resumption of employment growth since 2013 has been manifested in particular in increasing shares of
new employment in low-paid and mid-paid jobs.
£ Over a longer time frame (going back to the late 1990s), higher-paid jobs have continued to show the fastest
employment growth relative to those in the rest of the wage distribution in both recessionary and non-
recessionary periods.
£ There continues to be a variety of patterns of employment shift across Member States. During 2011 Q2–2016
Q2, some countries exhibited one of the two main patterns of employment shift identified in the literature –
upgrading or polarisation; for example, Sweden was clearly upgrading while Belgium was clearly polarising.
Other countries, such as Hungary, Ireland and Italy, exhibited downgrading shifts, where relative
employment growth was strongest in low-paid jobs. As employment has recovered since 2013 in countries
such as Greece and Spain, where it had previously fallen sharply, much of the fresh growth has been in mid-
paying jobs – where most jobs were destroyed during the recession.
£ More than 7 out of 10 jobs in the EU are now in services (71%); the service sector alone has added over 8
million jobs in the EU since 2011. Recent service sector employment growth has been asymmetrically
polarised, with greater gains in the bottom and top quintiles relative to the middle. The predominantly state-
funded sectors of education and health have made an increasing contribution to top-quintile employment
growth, consistent with less-constrained public finances.
£ There has been an increase of manufacturing employment headcount by 1.5 million since 2013. Most of this
increase has been in top-quintile engineering, professional and management jobs and not in more
traditional, blue collar production roles. EU13 countries have been the main beneficiaries of net new
manufacturing employment.
£ The large-employing job with the fastest rate of growth (7%) is that of ICT professionals in computer
programming, a job occupied by relatively young and high-skilled workers. It is predominantly male but with
an increasing female share of employment (15%).

29
Occupational change and wage inequality: European Jobs Monitor 2017

£ In the majority of other faster-growing large jobs, the share of older workers has increased significantly (by
over two percentage points since 2011), suggesting that extended working lives and later retirement are an
important factor in explaining recent employment growth.
£ As the recovery has strengthened, the standard or ‘core’ employment relationship – full-time, dependent
employment with a permanent contract – has accounted for much of the recent growth across the wage
distribution but with a skew towards well-paid jobs. At the same time, there is some evidence that atypical
employment forms such as part-time work and self-employment are becoming more prevalent even in
higher-skilled, higher-paying jobs.

30
 Part 2:
Wage inequality from an
occupational perspective
4 Background and methodology
It is well established that wage inequalities have been However, whether the two phenomena are related in
growing in many advanced economies in the past two any significant way is an empirical question, and
or three decades, although there are important nothing should be assumed without solid evidence.
exceptions and differences in terms of the extent and There could be both job polarisation (or upgrading) and
timing of the change across countries. The clearest and growing wage inequality without any significant link
most intense expansion of wage inequalities took place between the two phenomena. That could be the case if
in the USA and the UK in the 1980s (OECD, 2011), the distribution of wages within occupations had
extending in a generally more moderate form to many changed significantly in recent years; those changes
European countries in the 1990s and 2000s (with some could be much more consequential for wage inequality
noteworthy exceptions such as France). than any change in the occupational structure. In fact,
some recent influential studies on inequality trends
A separate but related debate has focused on the
would point in this direction (Piketty, 2014). In many
phenomenon of job polarisation in the same countries
cases, growing inequality is largely the result of a
over the same period. According to many analysts
concentration of earnings at the very top of the wage
(Autor et al, 2006; Goos et al, 2009), recent technological
distribution – the top 1% or even 0.1%. However, it
change and international trade have biased labour
seems unlikely that this development is significantly
demand against mid-skilled workers, polarising the
linked to broad occupational dynamics. Behind this
occupational structures of advanced economies. Others
increasing concentration of earnings at the very top of
(Oesch and Rodriguez Menes, 2011; Fernández-Macías,
the distribution would be institutional changes such as
2012a) have argued that job polarisation is not so
financial deregulation and destandardisation of
pervasive across developed economies; nor is it
employment (Saez, 2015), phenomena that seem more
primarily driven by market forces but by changes in
plausibly linked to growing within-occupation (or
labour supply, institutional processes of labour market
occupation-independent) inequality than to between-
deregulation and destandardisation of employment
occupation inequality. But again, this is an empirical
contracts. However, both sides would agree that labour
question that must be discussed with figures, which this
demand in recent years has been biased towards
report aims to do.
particular types of occupations, producing either job
polarisation or occupational upgrading. What does the existing literature say about the role
played by occupations in explaining growing inequality?
It seems more than possible that increasing wage
There have been significant contributions on this from
inequality and occupational restructuring could be
economics and sociology. In mainstream economics,
somehow related. In particular, it seems reasonable to
occupations have traditionally played a secondary role
think that an upward or polarised bias in labour
as explanatory factors, with skills differentials being the
demand could have contributed to increasing wage
prime explanation for wage inequality. But recent
inequality (although not necessarily as its main cause).
economic analysis of the labour market effects of
Even if the average wages paid by occupations and the
computerisation has assigned occupations a much
distribution of wages within occupations remained
more central role. Since computers have a different
stable, a process of occupational polarisation would
effect on the demand for different types of tasks,
increase wage inequality by expanding the proportion
occupations (understood as bundles of tasks) are a key
of workers with low and high wages relative to those in
mediating factor in the effect of recent technological
the middle (in contrast, occupational upgrading would
change on labour markets (Autor, 2013). On the other
compositionally reduce wage inequality by reducing the
hand, in sociological research, occupations (understood
relative share of low-paid work). Furthermore, a
as positions within the division of labour in society)
consistently uneven demand for labour in occupations
have always been considered one of the main
across different skill levels would tend to affect
determinants of the distribution of earnings and life
occupational wages in biased ways. All other things
chances (Weeden, 2002). There is some controversy as
being equal, a polarised labour demand would reduce
to whether occupations are becoming more or less
wage inequality in the bottom half of the distribution
important as drivers of wage inequality and, more
(since the wages of those at the very bottom would
specifically, whether they are behind the recent
increase with demand, relative to those in the middle),
increases in inequalities previously mentioned. Some
while increasing it at the top half. Occupational
scholars argue they are (Mouw and Kalleberg, 2010;
upgrading would lead to a relative increase in the wages
Acemoglu and Autor, 2011), while others argue the
of the highest-paid occupations, thus contributing to
opposite (Kim and Sakamoto, 2008; Mishel et al, 2013).
wage inequality even more directly.

33
Occupational change and wage inequality: European Jobs Monitor 2017
The analysis that follows uses EU data on wages and
occupational structures to contribute to this debate
from a comparative European perspective.
£ First, it evaluates to what extent wages are a
significant explanatory factor for wage inequalities,
using some of the main arguments from the social
sciences debate to orient the analysis.
£ Second, taking advantage of the fact that this study
covers nine European countries with rather
different institutional and economic structures, it
focuses on differences in the role played by
occupations in the distribution of wages across
different institutional families.
£ Finally, a time dimension is introduced, looking at
changes in the importance of occupational wages
during the recent recession.
Methodology
To the authors’ knowledge, there are no previous
studies of the role played by occupations in recent wage
inequality trends covering such a wide range and
diverse set of countries. The main reason is probably
the formidable methodological difficulties involved in
such a comparison. To do this kind of analysis, data
sources covering many countries and periods are
needed, including adequate and comparable measures
of the two main variables of interest – occupations and
wages. In strict terms, there is no single international
dataset that fulfils all these criteria, which means that it
is necessary to construct the analysis using different
sources and to be flexible in the operationalisation. This
section provides some details on the main concepts
used for the analysis and their measurement, discussing
the limitations of the data sources used and how they
have been dealt with.
Occupations: Concept and classifications
Occupations are defined here as ‘coherent bundles of
tasks that require specific skills, corresponding to
different positions within the division of labour in
society’ (Fernández-Macías, 2012b). The division of
labour refers to the breakdown of economic processes
into different tasks to be performed by specialised
workers (leading to enormous gains in efficiency but
also increasing structural complexity), which in
contemporary market economies is coordinated by two
different mechanisms: markets and hierarchies. Markets
coordinate the division of labour between companies
(horizontal division of labour), while hierarchies
coordinate the division of labour within companies
(vertical division of labour). The conventional
classifications of sector and occupation correspond to
the horizontal and vertical division of labour,
respectively. Sectors classify companies and workers
operating in different markets, while occupations
classify workers according to the position they occupy
34
within the hierarchy and skill structure of their
organisations.
The division of labour along the vertical and horizontal
dimensions, in practical terms, means that in most
cases, the unit of analysis will be a specific occupation
within a specific sector (an occupation-by-sector
combination: for instance, a secretary within the
construction sector). In the first part of this report, this
unit of analysis is called a ‘job’, but in the current part,
the term ‘occupation’ or ‘detailed occupation’ is used
interchangeably with ‘job’, for the following reasons.
£ Empirically, occupations are the main structuring
factor for most of the aspects of work and
employment that have been investigated over the
years (see Eurofound, 2013 and Eurofound, 2016a
for analyses of job quality and tasks, respectively).
£ Conceptually, occupation as defined above
(coherent bundles of tasks that require specific
skills and correspond to positions in the division of
labour) encompasses both dimensions of the
division of labour (conventionally called occupation
and sector).
In fact, ISCO incorporates sector distinctions at all levels
(for instance, at the one-digit level, there are different
groups for agricultural, manufacturing and services
workers). Previous EJM work relied on the combined
classification of ISCO and NACE because the level of
detail of ISCO that was available in EU-level data (two-
digit level, corresponding to 23 categories) was not
enough for the type of analysis intended. In practice,
ISCO at the three-digit level provides a level of
granularity that is equivalent to the combination of
ISCO and NACE at the two-digit level.
In the current analysis, the level of detail of the
occupational classification used will depend on the
possibilities afforded by the data at hand, as explained
later. For international comparisons, the ideal level of
detail of occupations would be ISCO at three digits or
ISCO at two digits combined with NACE at two digits.
This level of detail should generate a sufficient internal
homogeneity within each job and external
heterogeneity between them for the purposes of this
study, while retaining international comparability
(beyond three digits, the comparability of categories in
ISCO across countries is problematic; see Elias, 1997). In
some cases, however, ISCO will have to be used at the
two-digit level only or combined with NACE at the one-
digit level (or even ISCO one-digit level by NACE
one-digit level). In those cases, some of the
heterogeneity between jobs at the detailed level will
appear as heterogeneity within jobs at the aggregate
level. Since this type of flexibility in the definition of
occupation is necessary to carry out the intended
analysis, one can only address it by being careful in its
interpretation and explicitly discussing this problem
whenever necessary.

When using data from the SES, occupations will be
defined as the combination of ISCO at two-digit level
and NACE at one-digit level, with a further breakdown of
some categories (in practice very close to the standard
two-digit by two-digit classification of jobs normally
used in the EJM). In the case of the European Union
Statistics on Income and Living Conditions (EU-SILC),
occupations will be defined by combining ISCO at two-
digit level and NACE at the one-digit level – thus with a
higher level of aggregation than in the standard EJM
approach.
Wage: Concept and measurement
The second key variable in this report is the wage,
defined as the gross hourly remuneration of the work of
employees. In other words, the focus is on the
compensation of labour, not the earnings of employees;
hourly wages, not monthly or annual labour income.
Monthly or annual labour earnings are strongly affected
by issues such as working time and employment
stability, which are not directly related to occupational
differences (even though they may themselves be
unevenly distributed by occupations, their effect on
wages is of a different nature).
As in the case of occupations, the actual
operationalisation of this concept in the analysis will
have to be adapted depending on the characteristics of
the different sources. The SES uses strictly defined
hourly wages for employees, obtained at the
establishment level (so the information is provided by
managers rather than the workers themselves). In the
case of EU-SILC, an approximation to hourly wages is
used, obtained by dividing annual labour income in the
year before the survey by the number of months
worked, taking into account whether the workers were
full time or part time and adjusting for people with more
than one job (for more details on this measure, see
Eurofound, 2015b). So in practice, with EU-SILC, a
measure of full-time-equivalent wages is used rather
than hourly wages, which should be equivalent even if
not identical.
Data sources
The 2010 SES is used to make a static analysis of the role
played by occupations in wage inequality in Europe. The
SES has been conducted every four years since 2002 and
collects harmonised data on wages in enterprises with
more than 10 employees in all sectors except
agriculture, fishing, public administration, education,
health and community, and social services. The
inclusion of small enterprises and the above-mentioned
sectors is optional for the participating countries, and,
in fact, many of them opted for such comprehensive
coverage in the last edition of the survey (2010).
Although the actual method for collecting the
information can differ considerably across countries
(between specific surveys and administrative registers),
in all cases it is collected at the company level and
Background and methodology
based on payroll data (rather than on workers’
responses). The sample is representative of both
enterprises and workers in the sectors covered and in
companies of different sizes.
The main advantage of the SES for the purpose of this
study is that it is a survey aimed explicitly at measuring
wages with a high degree of detail. What this means is
that the target variable of wages can be constructed in a
relatively direct and precise way. The sample is very big
in most countries, which allows for a detailed
breakdown of wages by occupations. It also provides
reasonably detailed classifications of occupation (ISCO
at two-digit level) and sector (NACE at one-digit level
with some further breakdown of large categories such
as manufacturing, which in practice makes it similar to
two-digit level).
Its main disadvantage is the limited and inconsistent
coverage of the economy in different countries. Small
companies and public sector organisations are covered
in only some countries, and, unfortunately, the
microdata for public use do not allow the construction
of a consistent dataset in terms of coverage across
countries, unless all companies with fewer than 50
employees are eliminated from the sample, which is
obviously too restrictive. So, in practice, some countries
include companies with fewer than 10 employees and
some do not. Another problem with the SES is that it
cannot be used for analysing the change over time in
the effect of occupations on wages, because only three
waves are available and the classifications and coverage
change in each wave.
EU-SILC is used for the analysis of change in the effect of
occupations on wage inequality between 2005 and
2014. EU-SILC is a cross-sectional and longitudinal
database on income, poverty, social exclusion and living
conditions in the EU, coordinated by Eurostat, with data
drawn from different sources at national level. It is
representative of all private households and their
current members residing in the territory of the
countries at the time of data collection. A key advantage
of EU-SILC for the purposes of this study is that it
provides consistent cross-sectional data on wages and
occupations for the period 2005–2014. Furthermore, it
provides complete coverage of the economy.
However, EU-SILC provides only an approximate
measure of wages (which has to be computed on the
basis of annual labour earnings information). Sector is
only available at the one-digit level (occupation is
available at two digits). The sample size is considerably
smaller than that of the SES, which complicates the
detailed decomposition of the distribution of wages by
occupations.
35
5 Static analysis of the role of
occupations in determining the
wage distribution
Initial considerations and
theoretical arguments
As mentioned in the previous chapter, occupations have
traditionally played a secondary role as explanatory
factors in mainstream economics. In economics
textbooks, wages primarily reflect productivity
differentials between individuals, and occupations are
hardly mentioned (Mankiw, 2012, pp. 397–412). But
even from a mainstream economics approach, there are
reasons to believe that occupations could be associated
with wage differentials without playing a direct role in
wage determination.
Economic perspective
First, occupations may be associated with
compensating wage differentials. As Adam Smith
famously argued in The Wealth of Nations, if some jobs
involve performing very disagreeable or dangerous
tasks, they should be more highly compensated, all else
being equal (Smith, [1776] 1976, p. 117). Since different
occupations obviously involve different levels of
hardship and hazard, this factor could create systematic
between-job wage differentials. Empirical evidence,
however, suggests that this factor plays a very marginal
role in explaining overall wage inequality; it seems to be
important only in some extreme cases (Muñoz de
Bustillo et al, 2011, pp. 42–45).
Second, occupations may be associated with
differences in the amount of human capital. Human
capital refers to accumulated knowledge and
experience that makes individuals more productive and
therefore likely to receive higher wages (Becker, 1993).
Since different occupations typically require different
amounts of human capital, it could be associated with
systematic wage differentials. Two observations ought
to be made about this argument. First, it implies that
occupations do not play a role on their own; they just
group workers with a similar stock of human capital.
Therefore, if one could control for human capital, wage
differentials between occupations should disappear.
Second, this theory can provide only a one-dimensional
explanation of occupational wage differentials (linked
to skill levels), since its focus is on the amount and not
the type of human capital. In other words, wages would
vary across occupations depending only on the amount
of human capital they require; the fact that different
occupations involve performing very different types of
tasks and therefore require qualitatively different skills
is not part of this argument.
A third and more recent argument assigns occupations
a prominent role, associated with differences in the
types of tasks they involve. Technological change can
have a different effect on different types of task input
into the production process, being complementary to
some but substitutive to others. Since different
occupations involve different types of tasks, this could
lead to systematic wage differentials between
occupations that cannot be reduced to differences in
the stock of human capital. More specifically,
arguments from this perspective have posited that
recent technological change tends to depress labour
demand for occupations that involve higher levels of
routine, which tend to be in the middle of the skills
continuum (Acemoglu and Autor, 2011). So it is
important to note that, despite remaining within
mainstream economics, the tasks approach does assign
a prominent role to occupations, at least to the extent
that the types of tasks carried out are one of the main
defining characteristics of occupations (tasks cannot
exist on their own, they have to be coherently bundled
into actual occupations; see Autor, 2013; Eurofound,
2016a).
Sociological perspective
In contrast, occupations have always played a central
explanatory role in the sociological and institutional
economics traditions. From these perspectives,
occupations are understood as highly differentiated and
specialised positions within the complex division of
labour in modern societies, associated with different
cultures and lifestyles, and differential access to
economic resources and life chances. The key
mechanism linking occupations and the distribution of
wages (and economic inequality in general) is Weber’s
notion of social closure: ‘social groups formed around
positions in the technical division of labour create social
and legal barriers that restrict access to resources and
opportunities to a limited circle of eligibles’ (Weeden,
2002, p. 57). Some specific mechanisms and strategies
of occupational closure from this perspective include
37
Occupational change and wage inequality: European Jobs Monitor 2017
licensing, credentialing,11 certification, unionisation and
representation by associations. These strategies would
allow some occupations to generate rents, that is,
payments attached to positions independently of the
level of effort or productivity of the people occupying
those positions (Weeden, 2002, p. 58), leading to the
observed occupational wage differentials.
Measuring the effect of these mechanisms of
occupational closure would require systematic
information on institutional differences that is not
available at EU level, so it is beyond the scope of this
report (for an example of this approach comparing two
specific countries, see Kampelmann and Rycx, 2013 and
Bol and Weeden, 2014). However, they provide a
plausible explanation for occupational wage
differentials that cannot be directly linked to differences
in human capital, compensation for working conditions
or routine task content.
Other strands of the sociological literature provide
important qualifications to the centrality of occupations
in the structuring of wage inequalities.
In many sociological traditions, social class rather than
occupation is the central structuring factor of economic
outcomes. In general terms, social class can be
understood as broad groups of socioeconomic
stratification, defined by their position in relations of
exploitation, authority relations, employment contracts
or other factors (Erikson and Goldthorpe, 1992; Wright,
1997; and, for a more recent proposal, see Oesch, 2006).
In practical terms, social classes are often constructed
by aggregating from occupational classifications,
although secondary variables such as authority in
production are sometimes also used (Wright, 1997). In
other words, social classes can be often understood as
aggregated occupations, or occupations as very
disaggregated classes: this is an argument made explicit
in the neo-Durkheimian approach of David Grusky, who
conceptualises occupations as microclasses (Grusky
and Galescu, 2005). In order to explain a particular
phenomenon such as growing wage inequality, the
comparison of developments at the aggregate level of
big classes and at the detailed level of microclasses can
reveal different dynamics and underlying mechanisms
(for an example, see Weeden et al, 2007).
Other theories have argued that occupations play a
mediating role for the effect of separate social
stratification factors such as gender or race, via the
mechanism of occupational segregation (Tomaskovic-
Devey, 1993; Grimshaw and Rubery, 1997). Differential
(culturally and socially constrained) preferences and
labour market discrimination can produce a systematic
11 The process of formally accrediting competences in a defined area of practice to confirm that a person is fit to practise in that area.
38
under- or over-representation of some social groups in
specific occupations. This may affect the status and
social power associated with the occupations and may
end up reinforcing the inequality that initially generated
the segregation, further expanding occupational wage
differentials. As in the case of human capital, this
argument assigns occupations a mediating role in the
structuring of wages, and therefore it should (at least
partly) disappear if one could eliminate the effect
caused by the underlying segregation factors.
Another important qualification is that the role of
occupations in structuring economic outcomes
depends on other attributes of the socioeconomic
system, such as industrial relations or labour regulation.
For instance, in some countries unions are craft-based
while in others they represent the interests of the
working class as a whole; in the latter, occupations may
be less important for the distribution of wages than in
the former. Some of the mechanisms of occupational
closure previously mentioned (apprenticeship systems
or occupational licensing) are very different across
countries, which can also lead to systematic differences
in the effect of occupations on wages. So, even if
occupations are expected to play a significant role in
structuring wage inequality in most developed
economies, the importance of such a role is likely to
vary. In the particular case of Europe, this variation can
be expected to be associated with the well-known
institutional families (welfare regimes, varieties of
capitalism). These differences will be explored in some
detail in Chapter 6.
Finally, some recent studies on the evolution of
inequalities would suggest that the role of occupations
in determining wage inequality may be declining.
According to the thinking of Atkinson et al (2011), the
recent surge in income and wage inequality, particularly
in the economies of the USA and the UK, results from
the ‘retreat of institutions developed during the New
Deal and World War II – such as progressive tax policies,
powerful unions, corporate provision of health and
retirement benefits, and changing social norms
regarding pay inequality’ (Saez, 2015, p. 5). These
factors are either unrelated to occupational differences
or would tend to undermine some of the institutional
mechanisms behind them, and therefore would make
between-occupation differentials account for a
declining share of overall wage inequality. This
argument contrasts particularly with the previously
discussed idea of task-biased technological change as a
key factor behind growing inequalities. The role of
occupations in recent wage inequality trends in Europe
will be discussed in detail in Chapter 7.
 Static analysis of the role of occupations in determining the wage distribution

group component will be large. If they are not, most of

Occupations and wage
inequalities: An initial overview
How much wage inequality is associated with
occupational differentials in a European context? In
common with many previous studies on this issue (for
instance, Acemoglu and Autor, 2011; Mouw and
Kalleberg, 2010), one can try answering this question by
using a variance decomposition approach. The total
variance of wages in a country can be split into two
components when the data are grouped by
occupations:
£ the variance that results from between-group
differentials;
£ the variance that results from within-group
variability.
If the groups (in this case, occupations or jobs) play an
important role in structuring inequality, the between-
the variation in wages will take place within the groups,
and the within component will dominate.
According to this approach and using data from the
2010 SES, between-job differentials account for around
50% of the total variance in log wages (wages
transformed into logarithms) (and consequently,
within-job variability would account for the other half),
with some differences across countries, from 42% in
Germany to 53% in Poland (Table 3, Column 6). This
percentage of variance explained refers to the most
detailed occupational level, which in the EJM is called a
‘job’ and corresponds to two-digit occupations
combined with two-digit sectors (the number of these
jobs also varies across countries, between 450 and 650).
The most important component for the distribution of
wages in such a definition of jobs is actually occupation
as measured by ISCO: even with the 36 categories of
ISCO at two digits, one can already explain most of the

Table 3: Impact of occupations on wage inequalities: Results of analyses

ANOVA decompositions – % variance in log wages explained by between-group differentials

according to:
3. ISCO only 4. NACE only 5. ISCO + 6. Jobs 7. Jobs, excl. 8. Jobs, 8b. Jobs,
1. No.of 2. No. of (36 (19 NACE, no (ISCO x small wages not wages < top
observations jobs categories) categories) interaction NACE) companies logged 1%
France 187,177 444 40.96 7.94 43.21 45.32 43.69 18.11 44.77
Germany 1,745,189 652 34.84 9.03 38.01 41.67 44.32 38.88 47.13
Italy 264,506 514 41.34 13.84 42.91 47.39 50.59 41.46 47.39
Netherlands 158,004 493 37.46 15.12 40.1 42.54 42.93 29.13 42.19
Poland 629,176 590 46.98 15.77 50.2 52.93 54.11 36.34 49.44
Romania 233,877 574 39.52 10.81 45.48 48.91 53.14 35.15 42.81
Spain 205,132 484 37.42 11.61 40.29 43.48 48.98 31.55 42.58
Sweden 270,491 473 41.62 7.85 43.97 47.24 48.18 32.48 43.47
UK 167,467 470 45.99 12.07 48.72 51.12 54.6 12.04 41.7

Inequality indices (wages not logged) Human capital approach, log wages
9. Variance
explained by a 14. Variance 15. Wages net from
model with 12. Theil 13. Between explained by a model education and
sociodemographic between jobs/total with education and tenure, variance
variables 10. Gini 11. Theil jobs Theil tenure explained by jobs
France 42.25 27.28 16.25 6.93 42.68 25.38 29.43
Germany 56.25 32.68 19.00 9.16 48.19 41.03 25.33
Italy 43.02 28.66 15.16 7.58 50.01 33.67 20.65
Netherlands 53.47 29.40 16.19 6.52 40.28 42.9 14.8
Poland 45.57 35.27 23.01 12.07 52.46 35.25 25.35
Romania 40.98 39.02 29.74 15.14 50.92 28.49 28.44
Spain 47.99 29.58 16.07 6.98 43.41 36.4 19.68
Sweden 31.79 18.91 7.98 3.68 46.13 11.56 41.97
UK 35.5 36.83 30.85 12.69 41.11 16.39 37.75

Notes: The model in Column 9 includes the variables gender, age, education, tenure, part-time, temporary contract (except Sweden), company
size, company ownership, collective bargaining (except Sweden) and region. ANOVA = analysis of variance. Small companies (Column 7) are
those with fewer than 50 employees.
Source: SES 2010 (authors’ analysis)

39
Occupational change and wage inequality: European Jobs Monitor 2017
variance shown by the full range of 450+ jobs (see
Column 3). However, NACE and the combination of
NACE and ISCO also add significantly to the explanatory
power of this model (they add another 20% of variance
explained, see Table 3, Columns 4 and 5), so the
detailed definition of occupations, or jobs, can be
kept.12
In other words, occupations play a significant role in the
structuring of wage inequality in Europe. In order to
evaluate the significance of this result, it is useful to
compare it with a different variance decomposition
model, in this case using 10 key socioeconomic
variables as predictors (including gender, age,
education, tenure, company ownership and others, with
no interactions). As Column 9 of Table 3 shows, the
variance explained by such a model is comparable to
the variance explained by the ‘jobs’ classification –
again, with some differences across countries.
Wages are known to have a log-normal distribution:
strongly asymmetric and skewed to the right because of
a high concentration of values below the mean, which is
usually inflated by some very large values. Transforming
them to logarithms generally makes the distribution
more normal (more symmetrical, less skewed by very
high values) and therefore more tractable to
econometric modelling, which is why it is routinely
performed in economics. This approach is followed in
most of this analysis, as shown in Table 3. However, it is
important to note that transforming wages into
logarithms has a very significant effect on the
distribution of wages, making it ‘less unequal’, for
obvious reasons: the logarithmic transformation
compresses the distribution, with an increasing effect
on very large values. To evaluate the effect of such
transformation, a variance decomposition of wages by
jobs where wages have not been logged has also been
included (see Column 8). It can immediately be seen
that the variance explained by between-job differentials
is significantly reduced in most cases. This means that
there are some very large values of wages whose
occurrence cannot be linked to occupational
differences.
This is not a technical point, but a very significant result
for the purposes of this analysis, particularly so for
cross-country comparisons. As is well-known, the
existence of some very high values is a key attribute of
the distribution of wages (and income) in advanced
economies; according to recent research, it is one of the
drivers behind increasing inequalities (a point discussed
12 Table 3 (Column 7) also includes the results for a sample in which small companies have been eliminated from all countries. This makes the results more
comparable across countries by removing the previously mentioned problem of the SES having inconsistent samples for small companies in different
countries. The results are very similar, generally increasing the share of variance explained by jobs (which ranges from 43% to nearly 55%) and slightly
reducing the cross-country variation.
40
later). What the comparison between Columns 8 and 6
shows is that, while occupations play a significant role
in the distribution of the majority of wages, they play a
marginal role in the distribution of a minority of very
large wages. That is why not logging wages mostly adds
to within-job inequality (if all the super-high wages were
concentrated in a few occupations, not logging wages
could even make between-occupation differentials
more important). This can be confirmed by yet another
approach (shown in Column 8b), in which wages are not
logged but the top 1% of the distribution is excluded:
the variance explained by occupations in this
‘truncated’ wage distribution is similar to the variance
explained when wages are transformed to logarithms.
Hence, occupations play a very significant role in
structuring the majority of wages, but they cannot
explain the distribution of some very large values. This
on its own suggests that occupational differences may
not be driving the recent surge in inequality in some
advanced economies, at least to the extent that such a
surge is associated with developments at the very top of
the wage distribution.
However, there are very important differences across
European countries in this respect. In France and the
UK, the variance explained by occupation drops more
precipitously when wages are not logged (they fall to
18% and 12%, respectively, from around 50%), whereas
in Germany and Italy the decrease is quite small (just
3%–6%, to around 40%). These differences can result
from two factors:
£ the importance of those very high wages in the
overall distribution of wages (which would be
highest in France and the UK);
£ the extent to which those very high wages are
linked to occupational differences (for instance,
there are also outliers in Germany and Italy, but
they seem to be better predicted by occupations).
Table 3 also includes an alternative approach to
evaluate the impact of occupations on the distribution
of wages, in this case using the Theil index instead of a
decomposition of variance. The Theil index can also be
broken down into a between-group and a within-group
component, but has the advantage of additionally
providing an overall assessment of the level of
inequality in a distribution. The Gini index is also
included for this purpose since it is the most well-known
measure (Table 3, Column 10). In this case, wages are
not logged.
 Static analysis of the role of occupations in determining the wage distribution
The highest levels of wage inequality are observed in
Poland, Romania and the UK and the lowest in Sweden.
The overall level of wage inequality does not seem to be
related to the importance of occupations/jobs in
explaining it: for instance, the amount of wage
inequality explained by between-job differentials is
similar in countries with high and low overall levels of
inequality. This point is discussed later in connection
with country patterns. For now, it is important to note
that the Theil and the variance decomposition approach
provide a very similar overall assessment of the role of
occupations/jobs in the distribution of wages (they
would account for 40%–50%), although the specific
position of individual countries varies slightly in both
approaches.
Analysing the economic
arguments
The oldest economic argument to explain occupational
wages is probably the theory of compensating
differentials, advanced by Adam Smith more than 200
years ago. As mentioned above, empirical evidence is
not very supportive of this theory, at least in terms of
the overall distribution of income (though it may work
in some particular cases). However, one can try to
evaluate it empirically from an occupational
perspective: are between-job wage differentials related
to differences in the conditions of work? More
specifically: do higher occupational wages compensate
for bad conditions?
Figure 15 shows the relationship between the
conditions of work in different occupations and their
average wage for the nine European countries studied.
The vertical axis represents the average log wage. The
horizontal axis represents the average value on a 0–1
normalised scale for a composite index of job quality
(based on the proposal by Muñoz de Bustillo et al, 2011;
see also Eurofound, 2013) and its four higher-level
dimensions: intrinsic quality of work, quality of
employment conditions, health and safety conditions
and work–life balance. Each job (occupation–sector
combination) is represented as a dot in the charts (the
size of the dot being proportional to the employment
share of the job). A lowess (locally weighted scatterplot
smoothing) regression line to represent the shape of the
association is superimposed, and the Pearson
correlation coefficient is shown.
13 In the SES, the only education variable that can be used for international comparisons is one based on educational attainment, with three categories (low,
medium and high), which were included as dummies in the model. Work experience was included as years of tenure, a continuous variable (a quadratic
term was also included to allow for non-linearity).
The results clearly show that compensation for bad
working conditions is not a significant factor shaping
between-job wage differentials. In fact, between-job
wage differentials tend to be positively correlated with
job quality: jobs with bad working conditions tend to
also have lower wages and vice versa. This can be seen
in the overall job quality index (with correlations above
0.6 in all the countries covered) and in the dimensions
of intrinsic quality of work and employment quality. The
correlation with health and safety is also positive, but
less strong. And in the case of work–life balance, there is
essentially no correlation, positive or negative, reflected
in the lowess regression line, suggesting a mild negative
association in some countries. The aspect of work–life
balance, therefore, is the only one where there could be
a very weak case for compensating differentials in some
occupations, but even in that case, the fact that there is
no significant association does suggest that
compensation plays no significant role whatsoever.
So working conditions and wages tend to correlate
rather than compensate for each other, which may
suggest that both depend on some third variable.
Perhaps that variable is human capital and the
associated productivity differentials, as suggested by
another economic hypothesis reviewed earlier. Can that
hypothesis be also tested with these data? Human
capital cannot be directly observed or measured, but it
is frequently proxied by education and work experience
(Mincer, 1974). Following such an approach, Column 14
of Table 3 shows the variance of log wages that can be
explained by a model with education and tenure as
predictors.13 Despite its simplicity, this model accounts
for a significant amount of the total variance of wages
(again, there are differences across countries, but in
most countries, it is above 30%), although it is well
below the results for occupations or jobs.
However, the most important result is shown in Column
15 of Table 3, where log wages are expressed net of the
effect of education and tenure (in technical terms, using
the residual from the predicted values of the model
shown in Column 14), and the variance decomposition
is repeated by job using this new variable. A wage net of
differences in the stock of human capital is just the
observed wage of a person minus the average wage for
all workers with the same level of human capital (the
same education and years of tenure). If detailed
occupations or jobs were predictors of wage inequality
only because they are associated with different stocks
of human capital, they would not be able to explain any
of the differences observed in wages when expressed
net of human capital differences. Column 15 of Table 3
41
Occupational change and wage inequality: European Jobs Monitor 2017

Figure 15: Relationship between working conditions in different occupations and their average wage, nine
Member States
Index of job quality Intrinsic quality of work Quality of employment conditions Health and safety conditions Work-life balance

corr: 0.60 corr: 0.69 corr: 0.66 corr: 0.35 corr: 0.16

Germany

0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1

corr: 0.61 corr: 0.73 corr: 0.77 corr: 0.28 corr: 0.14

Spain

0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1

corr: 0.73 corr: 0.82 corr: 0.71 corr: 0.54 corr: 0.10

France

0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1

corr: 0.68 corr: 0.70 corr: 0.70 corr: 0.45 corr: 0.29

Italy

0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1

corr: 0.70 corr: 0.78 corr: 0.79 corr: 0.39 corr: 0.14

Netherlands

0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1

corr: 0.71 corr: 0.78 corr: 0.77 corr: 0.44 corr: 0.28

Poland

0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1

corr: 0.65 corr: 0.73 corr: 0.74 corr: 0.39 corr: 0.16

Romania

0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1

corr: 0.58 corr: 0.69 corr: 0.60 corr: 0.41 corr: -0.02

Sweden

0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1

corr: 0.74 corr: 0.82 corr: 0.76 corr: 0.45 corr: 0.16

UK

0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1 0 .2 5 .5 .7 5 1

Source: European Working Conditions Survey for working conditions and SES 2010 for wages (authors’ analysis)

42
 Static analysis of the role of occupations in determining the wage distribution

shows that is not the case; although the share of
variance explained decreases in all countries, between-
job differentials still account for a significant share of
the inequality between wages net of differences in
human capital (from 42% in Sweden to 15% in the
Netherlands). Therefore, although human capital
differences explain part of the role played by
occupations in the distribution of wages, they are only
part of the story. In terms of their effect on the
distribution of wages, occupations are not just groups of
workers with similar levels of human capital.
Occupational wage differentials cannot be reduced to
differences in education and tenure.
A related argument suggests that the type, rather than
the level, of human capital required to perform the
different jobs may be a key determinant of between-
occupation wage inequalities. The routine-biased
technological change hypothesis argues that
technological change depresses demand for
occupations that require a high level of routine task
content, and one should therefore expect those
occupations to have lower wages than the rest.
Expressed in more general terms, wage levels could be
negatively associated with the degree of routine
involved in each occupation.14 Figure 16 shows the
correlation between an index of routine tasks at work
calculated at the job level (the one presented in the EJM
2016 annual report; see Eurofound, 2016a for more
details) and the average wage of each job, with jobs
shown as dots proportional to employment in size, a
lowess regression line and Pearson’s correlation
coefficient (the same representation used earlier in
Figure 15).
According to these results, there is no clear correlation
between the overall level of routine of jobs and their
wage levels, and certainly not a negative association. If
the index of routine tasks is broken down into its two
subcomponents, repetitiveness and standardisation
(Eurofound, 2016b), it can be seen that this lack of
correlation conceals two opposite associations for the
lower-level indicators. The degree of repetitiveness in
the job is negatively associated with wages, whereas the
degree of standardisation is positively associated,
though to a much lower extent. This suggests that the
extent (and type) of routine task content of the different
occupations may be also part of the story, although not
a very significant one. It should also be noted that
routine task content, particularly in its repetitiveness
dimension (the one most plausibly linked to
occupational wage differentials, according to Figure 16),
is strongly correlated with the skills required by the
different jobs (see Fernández-Macías and Hurley, 2016
for a detailed discussion). In other words, the routine-
biased technological change argument would not add
much to the earlier more robust finding about the role
played by differences in the stock of human capital. If
one controls for the average educational level of jobs,
the role played by routine or repetitiveness becomes
much less important.
Analysing the sociological
arguments
The evidence presented so far seems, in principle, more
in line with the sociological than the economic tradition.
Occupations play a significant role in shaping wage
inequality and not just by grouping workers with similar
levels of human capital. The fact that occupations still
account for a significant part of the variance of wages
net of human capital suggests that occupation-specific
mechanisms (such as occupational closure) may be at
play.
In fact, one could even reinterpret the previously
discussed evidence on the role of human capital (in
particular, education) in a different way. The observed
association between levels of education and
occupational wage differentials may be the result of
credentialism and occupational closure, rather than
productivity differentials. Some occupational groups
may try to artificially inflate educational requirements
as a way to restrict new entrants and increase their
bargaining power, a process which could also generate
the observed association between education and
occupational wage differentials. The data used for this
study does not allow this to be clarified, but an
ambiguity in the interpretation of the results on the role
of human capital differences must at least be
acknowledged in explaining occupational wage
differentials.

14 This is a very simplified version of the argument of routine-biased technological change, for two reasons. First, the argument refers to change in wage
levels rather than the wage differentials observed at any point in time. Second, it does not replace but complements the human capital argument: the
level of routine would constitute a secondary axis of wage inequality, additional to the traditional axis of skills (thus, highly routine occupations would
tend to be in the middle of the wage distribution, rather than the bottom). A detailed discussion of this argument is beyond the scope of this report (see
Acemoglu and Autor, 2011 and Mishel et al, 2013), but the simple analysis presented in this report is still useful because, after decades of computerisation,
the predicted decline in wages of routine occupations should already be reflected in actually lower wages. In addition, recent empirical evidence suggests
that routine tasks and skill level are very strongly correlated, forming a common axis in terms of occupational differences rather than two different ones
(see Fernández-Macías and Hurley, 2016).

43
Occupational change and wage inequality: European Jobs Monitor 2017

Figure 16: Relationship between level of routine in jobs and their average wages, nine Member States
Index of routine tasks Repetitiveness Standardisation

corr: -0.13 corr: -0.50 corr: 0.28

4 4 4

3 3 3
Germany 2 2 2

1 1 1
0 .25 .5 .75 1 0 .25 .5 .75 1 0 .25 .5 .75 1

corr: -0.12 corr: -0.54 corr: 0.33

5 5 5

4 4 4

3 3 3
France
2 2 2

1 1 1

0 .25 .5 .75 1 0 .25 .5 .75 1 0 .25 .5 .75 1

corr: -0.15 corr: -0.51 corr: 0.28

4 4 4

3 3 3
Netherlands
2 2 2

1 1 1

0 .25 .5 .75 1 0 .25 .5 .75 1 0 .25 .5 .75 1

corr: -0.16 corr: -0.46 corr: 0.19

2.5 2.5 2.5
2 2 2
1.5 1.5 1.5
Romania 1 1 1
.5 .5 .5
0 0 0

0 .25 .5 .75 1 0 .25 .5 .75 1 0 .25 .5 .75 1

corr: -0.11 corr: -0.52 corr: 0.32

5 5 5

4 4 4

UK 3 3 3

2 2 2

1 1 1
0 .25 .5 .75 1 0 .25 .5 .75 1 0 .25 .5 .75 1

corr: -0.09 corr: -0.51 corr: 0.34

5 5 5

4 4 4

Spain 3 3 3

2 2 2

1 1 1
0 .25 .5 .75 1 0 .25 .5 .75 1 0 .25 .5 .75 1

corr: -0.33 corr: -0.47 corr: -0.06

5 5 5

4 4 4
Italy 3 3 3

2 2 2

1 1 1
0 .25 .5 .75 1 0 .25 .5 .75 1 0 .25 .5 .75 1

corr: -0.27 corr: -0.58 corr: 0.13

3 3 3
2.5 2.5 2.5
2 2 2
Poland 1.5 1.5 1.5
1 1 1
.5 .5 .5
0 .25 .5 .75 1 0 .25 .5 .75 1 0 .25 .5 .75 1

corr: 0.01 corr: -0.36 corr: 0.34

4.5 4.5 4.5

4 4 4
Sweden 3.5 3.5 3.5

3 3 3

2.5 2.5 2.5

0 .25 .5 .75 1 0 .25 .5 .75 1 0 .25 .5 .75 1

Source: European Working Conditions Survey for level of routine and SES 2010 for wages (authors’ analysis)

44
 Static analysis of the role of occupations in determining the wage distribution
However, one can try to test some of the sociological
arguments discussed earlier, in particular whether the
observed occupational differentials are less important
than broader class distinctions. Occupations have
always played a very important role in class theory:
they are the backbone of the two most influential
contemporary class schemes (those of E. O. Wright and
J. Goldthorpe), although both also rely on other
variables (employment status, managerial and
supervisory roles). But the full list of occupations or jobs
would be, from this perspective, unnecessarily detailed
for the analysis of most social phenomena (such as the
wage distribution), as well as lacking in some important
dimensions of social power within productive
organisations (such as capital ownership or supervisory
position). In empirical terms, this argument would imply
that a much smaller set of categories (classes) would be
able to account for most of the observed inequality in
wages.
Unfortunately, the SES data used here do not include
the self-employed nor any information on the
managerial or supervisory roles of employees (beyond
what is implicit in ISCO); this means a full test of this
hypothesis cannot be tested with the data. However, a
crude approximation to the Goldthorpe scheme can be
constructed (which is in practice quite close, though not
identical, to a reaggregation of occupations into one-
digit ISCO codes), assigning two-digit ISCO codes to
each of five categories:
£ higher service class (professionals, administrators,
managers and high-grade technicians);
£ lower service class (technicians and lower-grade
professionals);
£ routine non-manual workers (routine
administration, commerce and other service
workers);
£ skilled manual workers;
£ semi-skilled and unskilled manual workers.
The Goldthorpe proposal differentiates social classes
according to two principles: first, the ownership of the
means of production; and second, the nature of the
employment relationship (Erikson and Goldthorpe,
1992). The first principle is almost entirely missing in
this crude five-class classification, but the second
(mainly aimed at distinguishing those employees with a
labour contract from employees with service
relationships, as well as differentiating skill levels) is
reasonably well covered.
Figure 17 shows a visual decomposition of the total
variance of log wages in each country into three
components:
£ the variance resulting from between-class
differentials (‘explained between classes’, shown in
blue);
£ the variance resulting from between-job
differentials within each of the five classes
(‘explained between jobs within classes’, in orange);
£ the residual inequality that exists within jobs, also
distributed across the five classes (‘not explained,
by classes’, in green).
It is striking that the five very simple and crude pseudo-
classes account in all countries for a significant amount
of the variance explained by jobs. As usual, there is
cross-country variation, but in all countries the
differences between the five classes account for more
than half of the variance explained by jobs, and in most
countries for more than two-thirds. But the five simple
classes also provide a very interesting additional piece
of information: the extent of wage inequality within
each one of them also differs quite significantly, both
between and within jobs. In most countries, the most
unequal class is the higher service one (the exceptions
being Germany and the Netherlands), whereas the
classes more internally homogeneous in terms of wages
are skilled and unskilled manual workers everywhere.
So even with this very crude approach, the social class
argument seems quite compelling. Five very broad
classes defined by the type of employment relationship
and skill level can already account for a significant
proportion of the variance explained by a very detailed
list of jobs (between 450 and 650). At least for some
purposes, one could argue on the basis of parsimony
that the simple class scheme should be used rather than
the long list of occupations. Furthermore (although this
is only speculation) it seems likely that, if the classes
could have been built properly, the results would have
been even more significant.
However, as in the case of the human capital argument,
the full list of occupations/jobs still adds a significant
amount of explanatory power to this analysis, so it is
empirically justified to keep using them. Because of the
limitations of the data (the impossibility of building
proper classes), it cannot confidently be said that a
detailed occupational approach is superior to a simpler
class scheme to explain the observed wage inequalities.
But it can be said that the full classification of
occupations works better with the data and tools
available: as was argued earlier in the case of human
capital, classes are (a significant) part of the story but
not all of it.
45
Occupational change and wage inequality: European Jobs Monitor 2017

The final argument to be evaluated refers to self-selection may be at play too). The most important
occupational segregation as an explanation for occupational segregation factors mentioned in the
occupational wage differentials. As with human capital, literature are gender, ethnicity or migrant origin, and, to
in this argument occupations are not the source of the a lesser extent, age. Unfortunately, the SES does not
differentials but a mediating factor for an external provide information on the ethnicity or migrant origin of
mechanism, in this case discrimination linked to respondents, so that important factor cannot be
sociodemographic characteristics (though other covered. However, data on gender and age are available,
mechanisms such as culturally or socially mediated so this argument can at least partially be evaluated.

Figure 17: Class versus job decomposition of wage inequality, nine Member States

France Germany
Not explained, by classes Explained between classes Not explained, by classes Explained between classes

Routine non-manual Lower service

Higher service Lower service Explained between jobs within classes

Explained between jobs within classes Lower service

Lower
service Higher Unskilled
Routine S service manual
Skilled Unskilled non- k
manual Higher service Unskilled manual Higher service Skilled manual Routine non-manual Skilled manual
Routine non-manual Unskilled manual manual manual il

Italy Netherlands
Not explained, by classes Explained between classes Not explained, by classes Explained between classes

Routine non-manual Higher service

Routine non-manual Higher service

Explained between jobs within classes

Explained between jobs within classes
Unskilled
manual Higher
Lower service
Routine service Skilled
manual Skil
Unskilled Skilled Higher non- Unskilled Lower led
Lower service manual manual service manual Skilled manual Lower service Unskilled manual Farm Routine non-manual manual service ma

Poland Romania
Not explained, by classes Explained between classes Not explained, by classes Explained between classes

Higher service

Unskilled
Higher service manual

Unskilled manual Lower service Explained between jobs within classes

Explained between jobs within classes
Routine non-
manual
Routine
non- Skilled
Lower
Unskilled manual manual
Unskilled Skilled servi-
Routine non-manual Skilled manual Higher service manual Lower service Routine non-manual Lower service Skilled manual Higher service manual manual ce

46
 Static analysis of the role of occupations in determining the wage distribution

Spain Sweden
Not explained, by classes Explained between classes Not explained, by classes Explained between classes

Higher service
Higher service Lower service

Explained between jobs within classes

Lower
Explained between jobs within classes service
Unskilled
Unskilled manual manual Routine non-manual
Unskilled
manual
Routine
Higher non- Lower Skilled Skilled Routine Skil
non- led
Routine non-manual Skilled manual service manual service manual Lower service Unskilled manual manual Higher service manual ma

UK
Not explained, by classes Explained between classes

Higher service

Lower service
Explained between jobs within classes

Unskilled Skilled Unskilled Lower

Routine
manual manual service
Routine non-manual manual Higher service non-manual

Source: SES 2010 (authors’ analysis)

Figure 18 shows a decomposition of the total log wage occupations are the result of differences in pay by
variance explained by jobs (the same previously shown gender and age (and differences in the gender and age
in Column 6 of Table 3) for different sets of explanatory composition of jobs, that is, segregation), eliminating
variables. The approach is similar to the one used them from the picture (expressing wages net of their
earlier for evaluating the human capital argument: fit a compositional effect) would leave very small residual
multivariate regression equation using different between-job differentials. As Figure 18 shows, according
explanatory variables, and then see whether the to this approach, gender and age segregation only
variance of the residual is linked to occupations/jobs. In account for a significant share of occupational wage
this case, the approach is generalised by adding more differentials in the Netherlands (more than one-quarter)
and more variables to the model, starting with gender and to a lesser extent in Sweden and the UK. It is
and age, then adding education, then employment important to note that this does not mean that there is
attributes (tenure, part-time and temporary status), no occupational segregation or indeed wage
then company-level variables (establishment size, discrimination in the other countries; what it means is
ownership and collective agreement) and finally region. that gender and age do not play such a significant role
By comparing (subtracting) the variance explained by in occupational wage differentials. It is very unfortunate
jobs for wages computed net of the factors of each of that information on ethnicity or migrant origin is
those successive models to the variance explained for unavailable (which would probably explain some of the
the original wage variable, the role they play (if any) can occupational wage differentials in some countries), but
be evaluated in the observed between-job wage it seems unlikely that adding it would change the
differentials. overall picture very significantly. So, again, segregation
is part of the story, although in this case a smaller part
The first variables modelled are gender and age, and
and not even in all countries. The structuring role that
their impact on between-job wage differentials can be
occupations play in wage inequalities is not mainly the
interpreted as evidence of (gender and age)
result of segregation mechanisms.
segregation. If most of the differences in wages between

47
Occupational change and wage inequality: European Jobs Monitor 2017
Figure 18: Decomposition of the total log wage variance explained by jobs for different sets of explanatory
variables, nine Member States
60
50
40
30
20
10
0
Germany Netherlands Spain France
-10
Gender and age
Plus tenure, part-me and temporary status
Plus region
Source: SES 2010 (authors’ analysis)
The addition of education and other factors in Figure 18
allows a rough estimate to be made of the ‘pure’
explanatory power of occupation/job with respect to
wage inequality (the segment labelled ‘residual
inequality explained by job’). It is significant in all
countries, but there are very wide differences, from just
under 25% in the Netherlands to nearly 60% in Sweden
and the UK. It is tempting to interpret this residual as an
indication of the effect of the main factor that could not
be empirically tested with the data, that of
occupational closure (and mechanisms such as
occupational licensing, credentialing, certification,
unionisation and representation by associations).
However, the authors would caution against such
interpretation. Firstly, the measurement level of the key
48
Sweden Italy Romania UK Poland
Plus educaon
Plus establishment size, ownership and collecve agreement
Residual inequality explained by job
variables included in Figure 18 is often crude and, in
some cases, even inconsistent across countries in the
SES (for instance, establishment variables and regions
are not strictly comparable). These inconsistencies may
partly explain some of the observed differences in
Figure 18, but it is impossible to know to what extent.
Secondly, understanding education as a variable
exogenous to occupation in this context is problematic
because it is explicitly used as a criterion to differentiate
occupational levels. This makes it logically impossible
to disentangle the effect of occupation on the
distribution of wages from the effect of education, at
least in the simple way shown in Figure 18. Educational
differences (or more precisely, differences in
educational requirements) are a crucial aspect of the
occupational classification itself.
 Static analysis of the role of occupations in determining the wage distribution

Summary
This first empirical section can be summarised with the following points.
£ Detailed occupations or jobs account for a significant part of wage inequality in Europe: between 40% and
50% in the countries studied here.
£ Human capital differences are part of the reason why occupations account for such a significant amount of
wage inequality, but not all. Occupations matter for wage inequality even if human capital differences are
controlled for.
£ Broad occupational classes defined by the nature of their employment contract and skill level can account
for a significant part of the explanatory power of occupations on wage inequality, though not all of it.
£ Occupational segregation by gender and age is also part of the reason why occupations structure a
significant amount of wage inequality, but only in some European countries.
Overall, occupations seem to play an important role on their own that cannot be (entirely) reduced to other
factors such as human capital, classes or segregation. Although the data used did not enable the direct evaluation
of the role of occupational closure mechanisms, they remain a plausible explanation for some of the observed
variance in wages that is linked to occupations but cannot be explained away by other factors.

49
6 Occupational wage differentials
across European institutional
models
Varieties of capitalism and
occupational wage structures
The main empirical observation made in Chapter 5 was
that occupations are an important structuring factor of
wage inequalities in all the European countries studied.
However, there were differences between countries in
some important details with respect to how
occupations structured wage inequalities. For instance,
in some countries, there were big outliers in the
distribution of wages that seemed unrelated to the
occupational structure. The extent to which
occupational wage differentials could be explained by
the composition of jobs by gender, age or education
varied significantly across countries, as did the
significance of broadly defined social classes in the
structuring of occupational wage inequalities.
Is it possible to make sense of those country
differences? Can the countries be somehow grouped in
different categories or models with respect to how
occupations structure wage inequality? And perhaps
most importantly, can those patterns and country
groupings be related to different socioeconomic
models, as identified by the recent political economy
literature on varieties of European capitalism?
Literature on the varieties of capitalism distinguishes
two distinct types of advanced capitalist economies,
liberal market economies (LME) and coordinated
market economies (CME), according to the predominant
ways in which companies coordinate with each other
and other actors in five different spheres – industrial
relations, vocational training and education, corporate
governance, inter-company relations, and relations with
employees (Hall and Soskice, 2001, p. 8). In LMEs, the
main forms of coordination are competitive markets
and hierarchies, while in CMEs, companies rely more on
non-market forms of coordination. These different
forms of coordination produce different outcomes in
terms of wage distribution (Rueda and Pontusson,
2000). Wage-bargaining structures and skills systems
are key mechanisms in this respect. Whereas in CMEs
union density tends to be high and wage bargaining
relatively centralised and coordinated at the industry or
national level, in LMEs the social partners are less
organised, and bargaining takes place primarily at
company level. In CMEs, workers tend to have specific
skills tied to the company or industry where they work,
while in LMEs, they tend to have more general skills that
can be moved across companies and industries. As a
result, the distribution of wages in LMEs tends to be
more unequal and less structured by industries or
sectors than in CMEs.
It seems plausible that the distinction between LMEs
and CMEs would also have implications for the role of
occupations in structuring wage inequality. Although
overall wage inequality is lower in CMEs, the higher level
of coordination in wage bargaining, generally at
industry level, could be expected to make within-
occupation (or industry) wages more homogeneous and
between-occupation (or industry) wages more
heterogeneous, thus making occupational differentials
more important for the distribution of wages.
Furthermore, the higher specificity of skills in CMEs
could reinforce occupational boundaries. As a result,
one could expect lower wage inequality in CMEs but a
more important structuring role for occupations,
whereas LMEs would produce higher levels of inequality
in overall terms, but primarily within rather than across
occupational boundaries (making occupations less
relevant for wage inequality).
However, the relevance of this approach for the
purposes of the current analysis is limited by its
generality. In this study’s small sample of nine European
countries, there is only one clear case of an LME (the
UK), with all the others being variations of the CME
model. And there are reasons to believe that the
variations within the CME model are indeed substantial
and likely to produce very different results in terms of
the structuring role of occupations in the distribution of
wages. The degree of centralisation and coverage of
collective bargaining in CMEs varies considerably across
Europe (European Commission, 2009), as well as union
strategies and even ideological orientation; for instance,
in Sweden, unions have traditionally pursued a national
strategy of wage compression, explicitly aimed at
reducing the gaps between high-paid and low-paid
occupations and sectors, whereas in other countries,
wage bargaining is considerably less coordinated across
industries and less explicitly egalitarian. The role of
unions and collective bargaining in wage determination
is also changing in different ways and at different rates
across CMEs; in Germany, for instance, collective
bargaining coverage has declined significantly since the
1990s, which has contributed quite clearly to growing
wage inequality and to a widening gap between
unionised and non-unionised industries and
51
Occupational change and wage inequality: European Jobs Monitor 2017
occupations (Dustmann et al, 2009). The systems of
vocational training and education also vary quite
significantly between different CMEs; whereas in
Germany, apprenticeship systems are highly developed
(with the significant participation of unions and
occupational associations) and likely to reinforce the
role of occupations in structuring wage inequality
(Bol and Weeden, 2014; see also Kampelmann and Rycx,
2013), in other CMEs, apprenticeship systems hardly
exist.
Furthermore, the occupational closure approach
emphasises the importance of specific institutional
settings such as occupational licensing or credentialing
that are difficult to associate clearly with the very broad
distinction of LME versus CME. For instance,
occupational licensing plays a very important role in the
LMEs of the UK and the USA, but also in CMEs such as
Denmark, Italy and Spain (Kleiner, 2015).
In short, it is difficult to make specific hypotheses about
how occupational wage differentials should vary across
European institutional families. At most, countries that
are institutionally similar can be expected to be also
similar in this respect, and distinct from the rest.
Perhaps one could even advance the hypothesis that
Sweden and the UK (as perhaps the most distinct cases
of the CME and LME models, respectively) should
produce the most clearly different results, with the
other countries and models somewhere between. In the
following pages, the role of occupations in structuring
wage inequality is analysed systematically in the sample
of nine European countries, looking for patterns and
similarities, and trying to link them to the patterns of
overall inequality and to broad institutional differences.
To do this, this study first re-evaluates some of the main
findings discussed in Chapter 5, in particular:
£ the levels of overall wage inequality;
£ the variance of wages that can be explained by
occupational differentials;
£ the link between occupational differentials and
human capital, age, gender and social classes.
Secondly, some extra analysis focuses specifically on
country differences. The similarity of occupational
structures is evaluated across Europe, constructing with
a principal components analysis a hypothetical EU-level
occupational wage distribution (the one that is most
correlated with all national wage structures
15 Recent literature argues that the German model has taken a dualisation path in recent years, which has led to a significant expansion of labour market
inequalities (Thelen, 2012). But dualisation involves an increasing divide between the conditions of work and employment of insiders and outsiders, not a
generalised flexibilisation of the labour market. Therefore, the German model remains different from the liberal regime of the UK. Dualisation can be seen
as an inegalitarian version of the CME model. The effect of dualisation on the structuring role of occupations in wage inequality will depend on whether
the boundaries between insiders and outsiders cut across occupations or are associated with different occupational categories.
52
simultaneously) and then comparing it with each
individual occupational wage distribution.
Finally, a detailed analysis of the relative distance
between the average wages of a set of specific
occupations in each country is added, as well as
between occupational quintiles.
A discussion of country
differences
All the results are summarised in Table 4. The nine
countries analysed here (representing different
European institutional families) have been more or less
sorted in the table by their overall level of wage
inequality, shown in the first row of results using the
Gini index. The most unequal wage distribution is that
of Romania, closely followed by the UK and Poland,
then southern Europe (Italy and Spain), continental
Europe (France, Germany and the Netherlands), and
finally the lowest level of wage inequality by far of
Sweden. Germany is something of an outlier, since its
level of wage inequality puts it closer to the UK or
eastern Europe than to the continental countries.15
However, it is left in that position to facilitate the
comparison with countries that are institutionally
similar.
UK
In the UK, the second most unequal country in Table 4,
occupational differences account for more than half of
all the inequality in log wages (see Row 2a). This would
contradict some of the arguments stated earlier,
although there is an important qualification: as
discussed in Chapter 5, in the UK, occupations matter
for wage inequality only if wages are logged. If raw
wages are used as the dependent variable, the share of
variance explained by detailed occupations (all the
combinations of occupation and sector at the two-digit
level) is remarkably low, at 12.1% (Table 4, Row 2b). The
importance of some very large wages, and their
apparent independence from the occupational
structure, is something peculiar to the UK – only in
France can a similar phenomenon be observed, but to a
lesser extent.
Rows 6a and 6b of Table 4 show another peculiar aspect
of the UK occupational wage structure. A principal
components analysis of occupational wages was
performed for the nine European countries shown in the
 Occupational wage differentials across European institutional models

Table 4: Summary of country differences

Sweden France Germany Netherlands Italy Spain Poland Romania UK
1. Overall wage inequality (Gini) 18.91 27.28 32.68 29.40 28.66 29.58 35.27 39.02 36.83
2a. Variance of log wages explained by job 47.24 45.32 41.67 42.54 47.39 43.48 52.93 48.91 51.12
2b. Variance of wages (not logged) 32.48 18.11 38.88 29.13 41.46 31.55 36.34 35.15 12.07
explained by job
2c. Difference 2a - 2b 14.76 27.21 2.79 13.41 5.93 11.93 16.59 13.76 39.05
3a. Variance of log wages explained by 11.56 25.38 41.03 42.90 33.67 36.40 35.25 28.49 16.39
educaon + tenure
3b. Variance of log wages net of human 41.97 29.43 25.33 14.80 20.65 19.68 25.35 28.44 37.75
capital explained by job
4a. Variance of log wages explained by five 25.56 33.77 24.41 29.27 34.47 30.73 36.24 26.95 39.68
broad classes
4b. Variance within jobs in upper service 1.53 1.40 1.03 1.00 1.64 1.46 1.35 1.61 1.59
class versus empirical share
4c. Same, for skilled and unskilled working 0.50 0.78 0.89 0.92 0.67 0.71 0.72 0.68 0.58
class
5. Effect of control by gender and age in 5.23 0.80 1.90 12.87 1.70 0.18 0.25 0.41 6.34
variance explained by job
6a. Uniqueness in occupaonal wages 0.18 0.11 0.13 0.16 0.17 0.11 0.18 0.14 0.08
logged (PCF)
6b. Uniqueness in occupaonal wages not 0.14 0.12 0.12 0.13 0.22 0.12 0.20 0.18 0.20
logged (PCF)
7a. Relave differences between job-wage 1.22 1.34 1.54 1.64 1.40 1.33 1.59 1.81 1.70
quinles: quinle 3/quinle 1
7b. Relave differences between job-wage 1.60 1.94 2.04 1.69 1.93 1.92 2.30 2.25 2.16
quinles: quinle 5/quinle 3
8. Differences between quinles within Low Mid Low Low Mid Mid Mid High High
inequality
9. Percentage difference between wage of
cleaners in business services and wage of:
9a. Sales workers in retail 23% 21% 31% 0% 33% 2% 29% 35% 8%
9b. Building and related trades workers in 41% 23% 47% 62% 45% 19% 47% 57% 109%
construcon
9c. Metal and machine trades workers in 30% 36% 72% 42% 43% 47% 76% 94% 73%
metal manufacturing
9d. Business administraon associated 90% 94% 230% 102% 181% 107% 166% 204% 216%
professionals in private business services
9e. Health professionals in health and 74% 160% 253% 153% 362% 185% 159% 203% 215%
social services
Notes: Shading from light to dark highlights low to high values per row. PCF = principal component factor.
Source: SES 2010 (authors’ analysis)

table. This statistical procedure generates a new
variable (factor) that is a linear combination of the
occupational wages of all nine countries and can
therefore be understood as a kind of latent pan-
European wage structure, since it assigns to each ‘job’ a
value that is closest to the observed values of wages of
all countries simultaneously. In other words, this factor
is a newly constructed variable that summarises most
efficiently the distribution of occupational wages in all
countries. The factor accounts for 84% and 86% of the
observed variability in occupational wages and log
wages, respectively. This, on its own, means that there
is a remarkable consistency in occupational wages
across European countries: when a particular job is very
well-paid in one country, it tends to be very well-paid in
other countries too. But by looking at the correlation (or
lack of it) between the occupational wages of each
country and the generated factor, one can also get an
idea of how peculiar each wage structure is: this is the
coefficient of ‘uniqueness’ reported in Rows 6a and 6b
for wages and log wages. Looking at the results for the
UK, it can be seen that it goes from being one of the
most ‘unique’ countries in terms of its occupational
(raw) wages to being one of the least ‘unique’ when the
wages are logged. If one disregards (or rescales) the
values of some large outliers, the UK wage distribution
is very similar to that of any European country; if one
does not, the UK becomes very idiosyncratic.

53
Occupational change and wage inequality: European Jobs Monitor 2017
Rows 7, 8 and 9 in Table 4 provide a further glimpse into
the peculiarities of occupational wages in the UK. The
relative distance between occupational wages in the UK
is very large, as could be expected considering the very
high levels of general inequality. For instance, the
occupations/jobs in the middle quintile are 1.7 times
higher, on average, than those in the first quintile (Row
7a); and those in the top quintile are 2.16 times larger
than in the middle quintile (Row 7b): only in eastern
Europe are those differentials slightly bigger. Looking at
specific jobs (Rows 9a–9e), one can see that the
between-job differentials in the UK are, on average,
larger (even if there may be specific cases of jobs with
much larger differentials in particular countries, such as
health professionals in Italy). A final interesting
peculiarity of the UK is that the five broadly defined
social classes constructed in Chapter 5 account for the
largest proportion of overall wage variance in any
country (four-fifths of the total variance explained by
detailed jobs can be explained by just five broadly
defined social classes).
So the UK comes out as a very unequal labour market
with large occupational wage differentials, strongly
related to broad occupational classes, and an
occupational wage hierarchy similar to that of the rest
of Europe except for the (very important) existence of a
small minority of very large wages seemingly unrelated
to occupations.
Sweden
At the other extreme of the table is Sweden, which is in
many aspects the polar opposite of the UK. In Sweden,
overall wage inequality is very low, as are occupational
differentials. The wages of the middle quintile in
Sweden are only 1.2 times those of the bottom quintile,
and the wages of the top quintile only 1.6 times those of
the middle. On average, business administration
associate professionals earn only 90% more than
cleaners in business services, and health professionals
only 74% more. The five broad social classes account for
a smaller share of overall wage inequality than in any
other country except Germany, and the degree of
residual within-job inequality is similarly low in all five
quintiles.
But even though wage inequality is generally smaller,
the role played by occupations in structuring it is
actually high, almost as high as in the UK (occupational
wages account for 47% of the variance of log wages and
32% if wages are not logged). It is important to note that
this does not mean that wage differentials between
occupations are as high in Sweden as in the UK: as can
be seen by comparing the values in Rows 7a–7b and 9a–
9e of Table 4, they are much smaller in Sweden. But
wage inequality being generally smaller, it is similarly
structured by occupations in both countries (again, with
the important qualification of the distorting incidence
of very large wages in the UK, a phenomenon that is not
observed in Sweden).
54
Another surprising similarity between Sweden and the
UK is that human capital differences seem less
important in both countries for explaining occupational
wage differentials than in other countries. Row 3a of
Table 4 shows the variance explained by a model with
education and tenure (a simple Mincer equation), which
is lowest in these two countries as well. The result for
Sweden is consistent with previous estimates such as
those of Badescu et al (2011), while the result for the UK
seems a bit low though not implausible. But the
important thing is that in these two countries,
occupation accounts for a large share of the variation of
wages net of human capital differences (the residual of
the Mincer equation’s fitted values), suggesting that
occupational wage differentials are less explained by
broad human capital differences than in other
countries. So contrary to expectations, and despite their
big differences in terms of wage inequality and actual
occupational wage differentials (big in the UK, small in
Sweden), the role played by occupations in structuring
wage inequality seems equally important in both
countries.
Poland and Romania
Besides the UK, Poland and Romania have high levels of
wage inequality. As shown by Rows 7a–7b and 9a–9e of
Table 4, occupational wage differentials are as large or
even larger than in the UK. And, as shown by Rows 2a–
2c, occupations account for a very significant share of
overall wage inequality, irrespective of whether wages
are logged or not (which means that big outliers are not
so important in these wage distributions and that their
occurrence is better predicted by occupation). One can
also see that the Polish occupational wage structure is
one of the most peculiar in Europe (Rows 7a–7b).
Italy and Spain
Italy and Spain have middling levels of wage inequality
and mid-low levels of occupational wage differentials
(see Rows 7a–7b and 9a–9e in Table 4). However, even
though Italian occupational wages are not very unequal,
there are some very large outliers such as health
professionals (who earn almost four times as much as
cleaners in business services). The Italian occupational
structure is, in fact, the most peculiar of all of Europe,
with some jobs occupying very different positions in the
wage structure than in other European countries (as
shown by the uniqueness statistic of factor analysis in
Rows 7a–7b). As for the role played by occupations in
the wage distribution, the ANOVA results of Rows 2a–2c
show moderate values for Spain and high values for
Italy, irrespective of whether wages are logged or not.
France, Germany and the Netherlands
The group of three continental European countries is
the most diverse. Germany has relatively high levels of
wage inequality and France relatively low, with the
Netherlands somewhere in the middle. The wage

differentials between occupations are quite high in
Germany, among the highest in the sample of nine
countries (Rows 7a–7b and 9a–9e in Table 4), whereas in
the Netherlands occupational wage inequality is high
only in the lowest half of the distribution (as shown in
Row 7a). An interesting peculiarity of the Netherlands is
that it shows the clearest evidence of segregation by
gender and age as a driver of occupational wage
differentials (controlling for gender and age reduced the
variance explained by occupation by nearly one-third;
see Row 5 in Table 4), probably linked to the very high
incidence of part-time employment.
The role played by occupations in wage inequality is
also quite diverse in the group of continental European
countries. It is relatively high in France and relatively
low in Germany and the Netherlands. Not logging wages
changes the picture quite significantly in France
(because of the incidence of wage outliers and their
strong contribution to within-occupation inequality),
but very little in Germany. In Germany and the
Netherlands, the five big occupational classes account
for a small proportion of overall inequality, and wage
inequality within working class occupations is
particularly high. In Germany and the Netherlands also,
human capital differences account for a very significant
part of occupational wage inequalities, more than in
any other country.
Conclusion
This chapter has tried to identify systematic differences
between European countries in the way occupations
structure wage inequality and to link those differences
with European institutional variations.
Perhaps the most significant result is the high level of
similarity across all countries, rather than the
differences. In the nine European countries analysed in
the previous pages, occupations account for a similar
level of overall wage inequality, between 40% and 50%.
It is useful to contrast this with the variation in the level
of wage inequality itself: as measured by the Gini index,
the most unequal country (Romania) has more than
double the value of the least unequal (Sweden). What
this means is that, independently of how unequal the
distribution of wages is in each country, the proportion
of such inequality that occurs within occupations is
roughly the same everywhere (between 50% and 60%),
as well as the proportion of inequality that results from
occupational wage differentials (the remaining 40%–
50%). It is also surprising that the big differences in
wage-setting mechanisms and institutions (coordinated
by markets or collective agreements, with different
levels of centralisation and coverage, or with different
systems of occupational licensing, credentialing and
apprenticeship) do not produce significant differences
in the extent to which occupations shape the different
wage distributions. Again, these differences produce
Occupational wage differentials across European institutional models
clearly different outcomes in terms of inequality levels,
according to this analysis, but the same results shows
no significant differences in the role played by
occupations in structuring wage inequality.
A second striking finding concerns the similarity of
occupational hierarchies in Europe despite the large
differences in the actual wages associated with the
same occupations in different countries. A principal
components analysis enables the construction of a
hypothetical or latent EU-level occupational wage
hierarchy (a linear combination of all occupational wage
hierarchies, constructed according to their observed
correlations) that could, on its own, account for nearly
90% of all the information contained in all the country-
level observed occupational wages. In other words, if
occupation A is better paid than occupation B in one
European country, it is very likely to be also better paid
in all the other countries. This does not mean that the
relative (or absolute) difference between the average
wages of those two occupations is also the same across
countries: the actual wage differentials will vary
considerably, as overall wage inequality itself.
What these findings suggest is that behind all European
wage distributions, there is a very similar underlying
occupational backbone. Different institutional
frameworks may produce different levels of wage
inequality overall, but they do not alter the backbone
itself. They may stretch it or compress it (thus increasing
or decreasing overall wage inequality), but the sorting
of different occupations in a hierarchy will remain
essentially untouched, as well as the distribution of the
additional inequality between and within those
occupations. The striking similarity of this occupational
backbone across different European countries and
institutional families suggests that it is the result of
more fundamental features of economic systems, which
are shared by all similarly developed economies. In the
authors’ view, what this backbone may reflect is the
underlying similarity in the technical division of labour
and level of technological development of European
economies. Even if different European countries have
different economic structures, institutional frameworks
and cultural values, their underlying economic
processes and organisations share some key features to
the extent that they are similarly developed and
organised in a technical sense. Among those similar
features are the division of labour and the broad range
of technologies available for economic processes; these
shared features would produce the underlying
backbone to European occupational wages.
But although the underlying similarities in occupational
wages are striking and suggestive, they are not perfect.
There are also some significant differences across
countries, especially in some of the details and
associated factors. Can they be linked to varieties of
European capitalism?
55
Occupational change and wage inequality: European Jobs Monitor 2017
Occupational wage differentials (the relative differences
between the average wages associated with different
occupations) as such do vary across countries as much
as wage inequality itself and can be easily linked to
European institutional families. The differences
between highest- and lowest-paid occupations are
largest in the UK and eastern Europe, smallest in
Sweden, and with different gradations across
continental and southern European countries. But this
is hardly a new or exciting finding since occupational
wage differentials just reproduce the European
distribution of wage inequality. The fact that
occupations explain a similar level of wage inequality in
all countries, and that wage hierarchies are very similar,
implies that the variation in occupational wage
differentials will be almost identical to the variation in
wage inequality itself.
Some of the differences in the association between
occupational wage differentials and other variables are
more interesting, although not always easy to explain or
link to institutional frameworks. The link between
human capital and occupational wage differentials is
smaller in the two polar extremes of European wage
inequality and the most different ‘varieties of European
capitalism’: Sweden and the UK. Conversely, the
strongest association between occupational wages and
human capital as measured by education and
experience is observed in continental and southern
Europe. Despite their differences in other respects,
Sweden and the UK do share a similar orientation in
their educational systems towards general rather than
specific skills development, in contrast with continental
and southern European systems, where credentialing,
apprenticeship, vocational training and other features
of the educational system tend to produce more specific
skills in workers. These differences may explain some of
the observed differences in the link between
occupational wages and human capital in the different
countries.
56
Another interesting finding is the wide differences in the
share of occupational wages that can be explained by
differences between five broadly defined social classes.
In Italy, Poland and the UK, this value is remarkably high
(close to 40%), suggesting that, to a large extent, the
structuring role of occupations in wages reflects
broader processes of social stratification rather than
occupation-specific processes of wage differentiation.
In other words, broadly defined occupational classes
(and their associated mechanisms of differentiation) are
considerably more important in those countries than
other European countries. In Germany and Sweden, in
contrast, these broadly defined classes are considerably
less important factors of wage structuration.
Overall, the attempt to identify groups of European
countries where occupations structure wage
inequalities in similar ways, and to link them to
institutional variations in economic coordination, has
been unsuccessful. Clear groups of countries could not
be found, nor could a clear link between the effect of
occupations on the distribution of wages and the broad
institutional frameworks. However, the reasons for this
failure are themselves interesting findings that suggest
further possibilities for research. First, very significant
differences could not be found because there seems to
be a similar underlying structure of occupational wages
across Europe in terms of the distribution of inequality
between and within occupations, and in terms of the
implicit hierarchy of average occupational wages.
Second, the differences found seemed related to
aspects of their institutional framework that are
specifically linked to occupations and do not necessarily
vary according to broadly defined variations or
institutional families (such as the orientation of
educational and vocational training systems or the
relevance of broadly defined social classes).
7 Occupations and the evolution of
wage inequality in Europe
Introduction
Occupations clearly play an important role in
structuring wage inequality. But did they also play an
important role in the recent evolution of wage
inequality levels? As previously mentioned, in many
countries (though not all and to different extents) wage
inequality has increased in recent decades. Was this
development driven by widening occupational wage
differentials, or did these remain broadly stable? Or did
they actually become less important in recent years, as
a result of a widening of wage inequality within rather
than between occupations?
There are some recent studies relevant to this matter,
mostly for the USA and the UK to the authors’
knowledge, coming from both sociology and
economics. But the results are often contradictory in
their findings, despite analysing similar periods and
even using the same data. Some conclude that
widening occupational wage differentials and the
changing occupational composition of employment (job
polarisation) account to a significant extent for the
growing inequality in wages in the USA and the UK in
the 1980s and 1990s. For instance, Weeden et al (2007)
found that most of the growth of wage inequality in the
USA between 1973 and 2005 took place between rather
than within occupations. In fact, according to these
sociologists, most of this expansion took place between
broadly defined occupational classes rather than at the
level of detailed occupations. Mouw and Kalleberg
(2010) found that between-occupation changes
explained two-thirds of the increase in wage inequality
in the USA between 1992 and 2008, although they
cautioned that at least 23% of this change could be due
to a change in occupational codes over that period. The
same authors found, however, that between 1983 and
1992, most of the increase in wage inequalities took
place within rather than between occupations. The
economists Acemoglu and Autor (2011) used a variance
decomposition approach to argue that broadly defined
occupations (10 categories) became significantly more
important as explanatory factors for wage inequality
between 1979 and 2009, compared with other factors
such as education. For the UK, Williams (2013) reported
similar findings, with occupations accounting for an
increasing share of the variance in wages between 1975
and 2008; again, most of this increase being related to
broadly defined occupational groups or classes.
But in both sociology and economics, other studies
contest these findings and claim that most of the
expansion of inequalities took place within rather than
between occupations. For instance, the sociologists Kim
and Sakamoto (2008) studied the period between 1983
and 2002 in the USA, finding no evidence of an
increasing role for occupations in wage inequality. The
economists Mishel et al (2013), in an explicit rebuttal of
the findings of Acemoglu and Autor (using the same
data but with a different operationalisation), found only
evidence of an increasing role of occupations in
explaining US wage inequality between 1979 and 1994,
with a significant decline afterwards.
Despite using similar approaches and the same data
sources, the contrast between the findings of these
different studies is striking. Even within the group of
studies defending an increasing role for occupations,
there are important contradictions. For instance, Mouw
and Kalleberg (2010) found a decreasing role of
occupations in wage inequality for the period 1983–
1992, in contrast to Weeden et al (2007) and Acemoglu
and Autor (2011). Why are the results of different studies
so inconsistent, and which should be believed?
These inconsistencies are probably the result of the
methodological challenges of assessing the role of
occupations in wage inequality over long periods of
time. Occupational classifications are updated every
few years (in the USA, they were introduced in 1977,
changed in the late 1990s and changed again in 2010),
and the comparability of results before and after those
changes is highly problematic. The updating of
occupational codes is necessary because technical
change and the unfolding of the division of labour
renders them obsolete. But then to the extent that it is
better adapted to the new realities of work, an updated
classification should produce more internally consistent
occupations and therefore should increase the share of
variance in wages explained. Even if it may be possible
to estimate this reclassification effect in the short run
(for instance, Mouw and Kalleberg, 2010 attribute
almost one-third of the increase in wage variance
explained by occupations in the USA in the 1990s to this
effect), the comparability of occupational codes in the
long run remains problematic and the results very
sensitive to small methodological decisions on how
occupations are treated for long-term analysis.
A more general methodological problem is the
increasing importance of very large outliers in the
distribution of wages. A recent and very influential
strand of the literature on income and earnings
distribution has argued that the recent increase in
inequality is mostly the result of a massive expansion of
labour income for those at the very top of the
distribution (the top 1% or top 0.1%; see Piketty, 2014,
57
Occupational change and wage inequality: European Jobs Monitor 2017
especially Chapter 9; also OECD, 2011). This
development, according to the same literature, is very
poorly captured in standard government surveys on
income and wages such as the US Current Population
Survey (Atkinson et al, 2011), as a result of under-
reporting, sparse data, non-contact or refusals by top
earners (to uncover these trends in top labour earnings,
these studies used administrative registers and tax
return data instead). Since most of the studies on
occupational wages use surveys, they may miss a
significant part of the growth in wage inequality. This
problem may be compounded by the common practice
of using log wages rather than monetary wages as the
variable whose variance is to be explained. As seen
earlier in the case of the UK, logging wages can increase
dramatically the share of variance explained by
occupations if there are very large outliers, but it makes
the interpretation problematic if large outliers are a
feature and not a bug of the distribution. Among the
previously mentioned studies, the one that finds less
evidence of a growing role for between-occupation
differentials (Kim and Sakamoto, 2008) uses dollar
wages rather than log wages as the dependent variable.
Of course, some of these methodological problems will
affect this study, too, but they will be addressed as
explicitly as possible; in the case of changing
classifications, by trying to explicitly discuss the
potential effect of breaks and, in the case of big outliers,
looking at wages both logged and in euros for
comparison. The problem of missing the top wage
earners is a more intractable one, because the authors
do not know of any administrative data source that
includes reliable information on occupation.
Before embarking on a data analysis, it is important to
clarify the ways in which occupations could affect the
evolution of wage inequality. The first and most obvious
effect would be via occupational wage differentials: if
the differences between the average wages of
occupations become larger over time, they would drive
up overall wage inequality even if within each
occupation the distribution of wages would remain
stable. Second, occupations could also affect wage
inequality compositionally; even if average wages across
occupations and wage inequality within occupations
remain stable, wage inequality could increase if
employment expanded in high-paid and low-paid
occupations relative to the middle. That is how the well-
known phenomenon of job polarisation could have led
to an expansion of wage inequalities. Finally, overall
inequality could also expand if employment in the most
internally unequal occupations grew faster than in the
most internally homogeneous. For instance,
deindustrialisation can produce that effect because the
distribution of wages in services tends to be more
unequal than in manufacturing.
58
Analysis of the role of
occupations in the recent
evolution of wage inequality
Before starting the analysis with EU-SILC data, it is
necessary to briefly mention some limitations of this
data source, which are mostly related to the data used
and the period covered. First, EU-SILC aims to measure
income rather than wages, providing only an
approximate measure of the latter that must be
constructed under weighty assumptions and can
conceal some of the real variation of wages while
introducing some variation unrelated to wages. Second,
the sample size is relatively small (a few thousand
cases), which is particularly problematic when the goal
is to evaluate how the variance is distributed between
and across a very large number of groups (detailed
occupations or jobs). Third, although occupation is
measured at the two-digit level, sector is only measured
at the one-digit level (even slightly more aggregated, in
fact), which may not yield a sufficient level of
granularity to the approach taken here. Finally, the
period 2005–2014 is too short for making an evaluation
of the long-term contribution of occupational trends on
wage inequality, with any analysis likely to be biased by
cyclical developments.
How have those limitations been dealt with? With
respect to the measure of wages and the sample, the
results of EU-SILC are compared with those obtained
earlier with the SES (see previous chapters), which is a
much better survey for the purposes of this analysis (it
has a very large sample and a good measure of wages)
despite being available in practice for just one year.
With respect to the classification variables, previous
chapters have already shown that occupation at the
two-digit level already captures most of the variation of
the more detailed occupation-by-sector combination.
But since this study is mostly interested in evaluating
trends rather than making a precise assessment of the
importance of occupations at any point in time, this
should not be a big problem. And finally, even if only a
short period of time can be looked at, it is a period of
particularly intense occupational change in terms of
employment, which should allow a broad evaluation of
whether this change has affected inequality. This short-
term analysis is complemented, however, with some
exploratory medium-term results using the Luxembourg
Income Study (see Annex 6). In Annex 7, a similar
analysis is presented using a national-level dataset with
a much larger sample, the Spanish Continuous Sample
of Working Life. The results are very consistent with the
ones presented here using EU-SILC.
ANOVA test
The analysis begins with a breakdown of the variance
approach, which in Chapter 5 established that detailed
 Occupations and the evolution of wage inequality in Europe

occupations account for between 40% and 50% of the
total variance in wages. Now the same approach can be
used to evaluate whether the structuring role played by
occupations in the distribution of wages has changed in
recent years. This is shown in Figures 19 and 20, for raw
and logged wages, respectively, for nine European
countries between 2005 and 2014.16 It is important to
compare the values produced by EU-SILC with the
values provided previously using the SES, which is a
more adequate source. As could be expected because of
the limitations previously discussed, the values are
generally around 10 percentage points lower with
EU-SILC than with SES, but otherwise the picture
painted by both sources seems reasonably consistent.
And again, the main objective of this chapter is to
evaluate the trend rather than to establish the
importance of occupations in structuring wage
inequality.
Figures 19 and 20 paint a quite diverse and somewhat
volatile picture of the recent change in the role played
by occupations in structuring European wage
inequality.17 However, it seems a picture of either
stability or growth, with only one clear case of a decline
in the share of wage variance explained by occupations
(France). There are three countries where the variance
accounted for by occupations clearly and significantly
increased over the period: Finland, Poland and Spain. In
Germany and Italy, the trend also suggests an increase,
but much slighter (and potentially reversible). In the
Netherlands and the UK, the figures show a lot of
volatility, which in the case of the Netherlands may be
linked to the business cycle but in the UK just looks very
inconsistent (especially when wages are not logged).
Romania shows a more stable pattern, perhaps also
with some cyclicality since it first consistently declines
and then marginally increases. Finally, as already
mentioned, France is the only case of a more or less
clear decline (though again with some volatility).
So bearing in mind all the limitations previously stated,
the data suggest a stable or slightly increasing role of
occupational wage differentials in structuring wage
inequality in Europe during the past decade. This

Figure 19: Share of variance explained by job and occupation, wages not logged

Germany Spain Finland

.4
.3
.2
.1

France Italy Netherlands

.4
Variance explained

.3
.2
.1

Poland Romania UK

.4
.3
.2
.1
2005 2010 2015 2005 2010 2015 2005 2010 2015

Job Occupation
Note: Breaks in the classifications are indicated by the two vertical dotted lines: the first refers to the change in sector (NACE) and the second to
the change in occupation (ISCO).
Source: EU-SILC (authors’ analysis)

16 The countries shown are the same as those analysed in Chapter 5 using SES data, except that Finland has replaced Sweden. The reason is that the
Swedish results using EU-SILC seem problematic for occupations, with a much lower share of variance explained for no obvious reason. Since SES data
are much more adequate for the purposes of this study, it was decided to replace Sweden in this chapter with Finland as another representative of the
northern European social democratic economies.

17 The breaks in the NACE and ISCO classifications in Figures 19 and 20 are in some cases associated with discontinuities in the trend that should therefore
be ignored in the analysis. The clearest case is Spain, with big jumps around the classification breaks.

59
Occupational change and wage inequality: European Jobs Monitor 2017

Figure 20: Share of variance explained by job and occupation, wages logged

Germany Spain Finland

.4
.35
.3
.25
.2

France Italy Netherlands

Variance explained

.4
.35
.3
.25
.2

Poland Romania UK
.4
.35
.3
.25
.2

2005 2010 2015 2005 2010 2015 2005 2010 2015

Job Occupation
Note: Breaks in the classifications are indicated by the two vertical dotted lines: the first refers to the change in sector (NACE) and the second to
the change in occupation (ISCO).
Source: EU-SILC (authors’ analysis)

impression is reinforced if one focuses on the period
after the onset of the crisis (around 2008), when in some
cases there is a change in the trend.
Theil index test
That does not necessarily mean that occupations have
been driving wage inequality developments in recent
years. A Theil index decomposition can help to clarify
this, a tool that was also used for the static analysis in
Chapter 5. The Theil index itself is a measure of the
degree of inequality in a distribution, which can be
directly compared across countries and over time. It can
be broken down by any grouping variable such as
job/occupation, into a within component (an
aggregation of the level of wage inequality that exists
within occupations) and a between component (the
extent of wage inequality that results from differences
between the average wages of different occupations).
Figure 21 shows the yearly evolution of the within and
between components of Theil (added, they would
reflect the overall level of inequality in the country,
which is not directly shown in the figure but can be
inferred), plus the share that the between component
represents over the total Theil (the ‘explained’ indicator,
which has a similar interpretation to the variance
explained by occupations and which can be used to
evaluate the role they play in structuring wage
inequality).
The explained indicator shown in Figure 21 (the dashed
line) paints a very similar picture to the ANOVA
previously discussed. But the evolution of inequality
between and within occupations can now be looked at
as well, and it suggests a rather different interpretation.
It is the within component that drives change in the
overall level of inequality in most cases, even when the
share of inequality that is directly linked to occupational
differentials tends to grow. The reason is, simply, that
the between component tends to be very stable; and
when it changes, it tends to move in parallel with the
evolution of the within component.

60
 Occupations and the evolution of wage inequality in Europe

Figure 21: Theil decomposition of wage inequality by detailed occupations (jobs)

Germany Spain Finland

.3 .4
.2 .35
.3
.1 .25
0 .2

France Italy Netherlands

Theil decomposition

.3 .4
.2 .35
.3
.1 .25
0 .2

Poland Romania UK
.3 .4
.2 .35
.3
.1 .25
0 .2

2005 2010 2015 2005 2010 2015 2005 2010 2015

Within Between Explained

Notes: The vertical dotted line indicates a break in the occupational classification. The ‘Explained’ indicator is plotted on the right-hand axis.
Source: EU-SILC (authors’ analysis)

In Finland and Poland, where the increase in the role In order to conclude that occupational dynamics are
played by occupations in the ANOVA was clearer driving wage inequality trends, one should see the
(a result confirmed with the Theil approach), it is a between component changing more significantly than
significant decline in the within component of wage the within component; however, the exact opposite is
inequality that makes the explanatory power of found. A possible objection to this argument is that the
occupations grow (a denominator effect). So, within component may be just more sensitive to
paradoxically, occupations become more important not measurement errors and random noise, while the
because occupational wage differentials grow, but between component (which derives from a comparison
because they remain relatively stable in the face of a of occupation averages) could just be more stable.
generalised decline of wage inequality (which takes Perhaps a long-term analysis would reveal the changes
place mostly within occupations). in the within component to be insignificant, whereas
steady developments in the between component would
The picture is similar in Germany and Italy, although
become more significant over time. Without looking at
with much more stability in both the between and
long-term data, it is difficult to discuss such an
within components. In Romania, both the between and
objection. In some countries, it seems plausible that the
within components clearly declined over the period,
within development just reflects cyclical developments
with only a marginal increase in the importance of the
or even pure statistical noise (this seems a plausible
former in the very last year. And, in France, the only case
case in the UK). But just by looking at the results, the
where the variance explained by occupations
objection does not seem to apply to other countries,
consistently declined, the within component actually
where trends seem similarly consistent in the between
increased over the period while the between
and within components of Theil, and the overall trend is
component remained stable or slightly declined. The
more clear. This objection would also imply that the
apparently cyclical development in the Netherlands is
short-term evolution of wage inequality picked up in
again driven by within-occupation changes, as is the
Figure 21 would itself be too volatile or cyclical, even
volatility of the UK (with between-occupation shifts
though it is reasonably consistent with other recent
being more stable). Even in Spain, where the between
studies.
component seemed to increase more clearly
(particularly between 2008 and 2009), it runs in parallel
with the evolution of within-occupation inequality, and
therefore cannot be said to drive the overall evolution.

61
Occupational change and wage inequality: European Jobs Monitor 2017

A dynamic decomposition of Theil’s L index analysis). The compositional change is particularly

For a final test of whether occupations are driving wage
inequality trends in Europe, another decomposable
inequality index of the Theil (or Generalised Entropy)
family is used: the Mean Log Deviation or Theil’s L index.
The advantage of this alternative index is that its
evolution (change in L) by subgroups can be easily
broken down into the following components:
£ change in L resulting from changes in within
subgroup inequalities (a);
£ change in L resulting from changes in the subgroup
population shares – this can be further
differentiated in effect of subgroup population
share shifts through the within L component (b) and
the effect of subgroup population share shifts
through the between L component (c);
£ change in L resulting from changes in the subgroup
means (d).
The four components add to overall change in L:
ΔL = a + b + c + d (Mookherjee and Shorrocks, 1982). The
benefits of this approach are that the effect of the
different components is quantified (rather than inferred
from the observation of trends), and it allows the impact
of compositional change to be evaluated explicitly
(again, this effect was only implicit in the previous
important for the purposes of this analysis, because it is
how the widely discussed patterns of job polarisation
and upgrading could contribute to inequality trends.
The results of this dynamic breakdown are displayed in
Figure 22. They show that, at least for the short period
and the nine countries studied here, it is changes in
wage inequality within jobs/occupations that drive
overall inequality, not changes in occupational wage
differentials (component d) or in occupational
employment shares (components b and c). The
particularly small contribution of occupational shares to
the overall developments of wage inequality should be
noted. This is important because it suggests that the
widely discussed phenomena of job polarisation and
upgrading (or any other compositional change) had at
most a very marginal contribution to wage inequality
developments in the countries and period covered. It is
wage inequality within occupations that changed most
(increasing or decreasing, cyclically or consistently) over
the period, with a smaller but, in some countries,
significant role of occupational wage differentials (such
as Romania or Spain and perhaps Finland), but hardly
any role whatsoever for the effect of changing
occupational shares.

Figure 22: Dynamic Theil breakdown of wage (not logged) inequality, contribution of occupational
differentials and shares

Germany Spain Finland

.03 .02
.06
.01
.02 .04 0
.01 .02 -.01
0 -.02
0
Dynamic Theil decomposition

France Italy Netherlands

.04 0 .06

.02 -.005 .04

0 -.01 .02

-.02 -.015 0

Poland Romania UK
.01 0 .02
0 -.005 0
-.01 -.01
-.02
-.02 -.015
-.03 -.02 -.04
2005 2010 2015 2005 2010 2015 2005 2010 2015

Within Share within Share between Between

Source: EU-SILC (authors’ analysis)

62

Conclusion
All the analysis in this report suffers from significant
constraints related to the limitations of the data
available for EU-level comparative analysis on the
distribution of wages by occupations. Those constraints
were particularly restrictive in this final section, and
they limit considerably the scope of the conclusions
that can be extracted. What can be said is that, for the
period and countries studied, occupational dynamics
have played only a marginal role in the development of
wage inequality; within-occupation changes were a
much more important driver of the observed trends in
wage inequality between 2005 and 2014. This does not
mean that occupations became a less important
structuring factor for the wage distribution in the
countries analysed; in most cases, their structuring role
remained stable, even increasing in some cases as a
result of a decline in within-occupation wage inequality.
Although the short period covered obviously limits the
scope of these observations, they can still make a
relevant contribution to the debate, for two reasons.
First, because the previously mentioned problems in the
comparability of occupational classifications in the long
run may suggest looking at short-term periods instead.
It is important to emphasise that the time comparability
problem is not only about the occupational
reclassifications themselves, but also about the reason
Occupations and the evolution of wage inequality in Europe
reclassifications are needed every few years: the
changing nature of work is continuously eroding the fit
between the occupational codes and the jobs that
actually exist, introducing an element of variation in
wages and other attributes of jobs that is unrelated to
occupational dynamics in strict terms. Second, as
mentioned earlier, the period studied is short but
particularly eventful. As discussed in previous EJM
reports (see, in particular, Eurofound, 2013; and for a
similar argument for the USA, see Jaimovich and Siu,
2012), the intensity of structural change in European
labour markets in the aftermath of the Great Recession
was striking. Not only the intensity of structural change
but also its nature (a generalisation of a negative job
polarisation pattern, with intense destruction of mid-
paid jobs in many countries) should make the effect of
occupational dynamics on wage inequality particularly
strong in this period. And yet no significant impact was
found. This would suggest that changes in occupational
structures (phenomena such as job polarisation or
upgrading) are unlikely to have significant implications
on their own for the evolution of wage inequality.
Changes in occupational wages, on the other hand, did
play a small but significant role, which perhaps in longer
periods can become more important for inequality
trends. Unfortunately, studying these longer-term
trends from a comparative European perspective is
currently hampered by the lack of suitable data.
63
8 Conclusions
Understanding the link between occupations and wage Second, the role played by occupations in the
inequality is necessary for understanding how the structuring of wage inequality has some strikingly
division of labour and technological change affect the consistent attributes in all European countries,
life chances of workers and provide an underlying irrespective of the overall levels of inequality or
structure for the distribution of economic resources in institutional frameworks. It seems that the occupational
society. In a context of increasing earnings inequality structure provides a unifying backbone to European
and accelerating technological change, this seems wage distributions, with occupational wages
particularly important. And yet existing research on this accounting for a very similar share of overall wage
issue is limited, sometimes contradictory and lacking an inequality in all countries and occupational hierarchies
international perspective. being very similar despite wide differences in wage
inequality levels. The backbone is the same, but it is
Part 2 of this report tries to contribute to a better
more or less stretched in the different countries
understanding of the role that occupations play in the
according to the overall level of wage inequality, itself
structuring of wage inequality from a European
associated with institutional differences in bargaining
comparative perspective, studying recent data for nine
and educational systems, among other factors. Some
European countries. Although this exercise has been
further significant differences were found in other
constrained by methodological problems imposed by
aspects of the occupational wage distribution, such as
the lack of suitable data, it produced some interesting
the distorting role played by very large outliers in the UK
results, whose significance is amplified by the wider
distribution and the aggregation of occupational wage
scope of the analysis compared with previous studies.
differentials in bigger occupational classes (much
Those results can be synthesised in three main
smaller in Germany and Sweden than in the UK, for
conclusions.
instance).
First, occupations play an important role in the
Finally, despite the important role played by
structuring of wage inequality in all the European
occupations in structuring wage inequality and the
countries studied, an importance that can be quantified
significant changes in the occupational structure that
as 40%–50% of the total variance in wages being
took place in Europe in the aftermath of the Great
directly the result of occupational differences. These
Recession, occupational dynamics did not drive
differences are themselves partly explained by
developments in wage inequality in the last decade in
systematic differences in the stock of human capital of
the nine European countries studied. Most of the
workers in the different occupations, but only partly.
changes in wage inequality between 2005 and 2014
Although, at present, it is impossible to test it directly
were the result of changes in the distribution of wages
with EU-level data, an even more significant part of
within occupations, with changes between occupations
occupational wage differentials seems to be associated
playing a much less important role and changes in the
with occupation-specific mechanisms of wage
occupational structure (job polarisation) playing a very
differentiation, such as occupational closure. On the
marginal one. Although the period studied is short, it
other hand and particularly in some countries, such as
was particularly intense in terms of occupational
the UK, occupational wage differentials seem to be
restructuring, so it seems unlikely that compositional
strongly structured by broader mechanisms of social
changes such as job polarisation or upgrading could be
class differentiation, not limited to human capital either
a significant driver of wage inequality in the long term.
but to other factors such as the nature of employment
relations or power in labour markets. In some countries
(such as the Netherlands), occupational wage
differentials are also linked to mechanisms of
occupational segregation by gender, age or other
sociodemographic factors.

65
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69
Annexes
Annex 1: Shifts in employment composition
Table A1: Indicators of shifting composition of employment, 2008–2016

Employment rate Gender employment Older workers High-skilled white

Indicator Employment (20–64-year-olds) gap Part-time workers (55 years and older) collar workers
Change Change Change Change Change Change
Country 2008–2016 2016 2008–2016 2016 2008–2016 2016 2008–2016 2016 2008–2016 2016 2011–2016
% % % % % % % % % % %
Austria 5.1 74.9 0.6 6.1 -2.8 28.8 5.1 14.6 4.0 40.7 3.2
Belgium 3.2 67.3 -0.5 8.3 -2.5 25.1 2.5 15.3 5.1 44.8 1.3
Bulgaria -10.0 68.0 -2.5 6.0 -0.4 2.3 -0.1 19.8 4.6 31.8 1.2
Croatia -8.8 62.1 -3.2 7.4 -4.9 7.0 -1.1 16.1 2.2 35.5 5.7
Cyprus -3.5 69.8 -7.3 3.3 -7.5 14.1 6.3 15.9 0.6 35.0 1.5
Czech Republic 2.5 76.5 4.0 11.9 -2.2 6.7 1.8 17.9 2.6 37.6 0.8
Denmark -0.2 77.7 -2.2 5.5 -1.2 28.4 4.0 20.1 3.5 45.0 1.8
Estonia 0.3 77.7 0.6 1.0 -1.4 11.0 4.5 23.0 4.9 46.0 3.0
Finland -3.8 73.9 -2.7 4.0 -0.3 16.1 3.2 21.0 3.0 45.3 2.5
France 0.4 70.2 -0.5 3.5 -2.1 18.9 1.9 16.6 5.0 45.5 1.5
Germany 7.5 78.5 4.8 6.5 -2.8 28.1 1.9 22.1 6.8 44.4 1.5
Greece -20.2 56.6 -10.1 15.7 -5.1 9.8 4.3 14.8 1.1 30.2 0.7
Hungary 13.0 71.4 10.0 8.6 -0.6 5.3 0.7 16.4 5.3 34.2 -1.5
Ireland -6.2 70.0 -2.9 8.3 -4.3 22.9 4.4 17.6 4.4 40.6 0.8
Italy -1.4 62.1 -1.2 16.2 -3.5 18.7 4.0 19.3 6.9 35.9 0.5
Latvia -16.3 73.5 -2.9 -1.9 -2.7 8.7 2.1 21.7 3.5 39.6 0.8
Lithuania -4.5 75.4 3.0 -2.4 -4.4 8.5 2.0 21.7 6.8 42.2 -0.4
Luxembourg 24.3 70.4 0.9 10.5 -3.8 19.5 3.1 10.5 1.0 57.4 2.2
Malta 21.2 69.5 10.0 22.4 -9.6 15.0 3.5 15.0 3.9 40.2 1.6
Netherlands -2.0 77.0 -1.9 7.6 -1.6 50.6 3.4 19.0 4.8 46.8 0.2
Poland 3.1 69.1 4.4 9.9 -0.5 6.9 -1.4 16.7 6.1 37.6 3.7
Portugal -10.6 70.5 -3.0 2.7 -3.6 11.9 -0.4 20.5 1.6 35.7 6.4
Romania -10.2 66.6 1.3 13.8 3.7 8.8 -1.3 17.2 0.9 22.8 0.6
Slovenia -7.1 70.6 -2.3 7.3 -1.7 9.8 0.8 13.7 2.9 42.1 -1.3
Slovakia 3.6 69.9 1.6 11.0 -0.9 6.1 3.8 15.2 5.4 31.2 -0.2
Spain -11.4 63.7 -5.5 9.0 -6.8 15.3 3.5 16.0 4.4 33.2 1.1
Sweden 6.7 81.5 0.7 4.2 -1.2 25.8 -1.2 21.1 0.2 51.7 5.5
UK 6.9 77.6 2.2 6.6 -1.1 26.8 1.6 19.0 2.3 48.8 2.0
EU 0.3 71.1 0.6 8.1 -2.5 20.5 2.3 18.6 4.6 41.0 1.8

Note: High-skilled white collar workers are those in ISCO main groups 1–3 (managers, professionals and associate professionals). Values are
colour coded by column; highest values are green, middle values are yellow and lowest values are red.
Source: EU-LFS (authors’ calculations)

71
Occupational change and wage inequality: European Jobs Monitor 2017

Annex 2: Handling of data breaks

Table A2 describes how major classification breaks were
handled in the analysis.

Country Nature of break Year and quarter Impact Solution

France ISCO occupational
classification break
Germany ISCO occupational
classification break
Netherlands ISCO occupational
and Slovakia classification break
2013 Q1 Some reassignment of
employment across ISCO
categories – mainly obvious at
two-digit level.
2012 Q1 Significant reassignment of
employment across ISCO
categories, at one- and two-digit
levels of detail.
2013 Q1 Some reassignment of
employment across ISCO
categories – mainly obvious at
two-digit level.
Aggregate ISCO two-digit to one-
digit for ISCO two-digit categories
10–54 for all quarters covered.
Use 2012 Q2 to 2016 Q2 data for
all German charts, omitting the
first year.
Use 2013 Q2 to 2016 Q2 data for
all Dutch and Slovakian charts,
omitting the first two years.

Eurostat identified breaks for other Member States in
different quarters for the core variables (ISCO and
NACE) as well as for employment estimates. However,
adjustments were made only in the above cases as they
involved obviously artificial and large shifts in
employment share by occupation. Luxembourg was
dropped in the analysis due to very significant variation
in employment share estimates from year to year, so all
EU aggregates are for the EU27 rather than the EU28.
For the EU27 aggregate figures for 2011 Q2, the missing
data for Germany, the Netherlands and Slovakia are
accounted for by backcasting from 2012 Q2 in the case
of Germany and 2013 Q2 in the case of the Netherlands
and Slovakia to 2011 Q2 using the aggregate
employment shift observed, thus preserving the
structure of employment observed in 2012 in Germany
and 2013 in the Netherlands and Slovakia. The
assumption, therefore, is that the composition of
employment by jobs did not change in Germany in
2011–2012 or in the Netherlands and Slovakia in 2011–
2013; only the levels of employment changed. For the
EU27 aggregates in the breakdown charts (for example,
gender, full-time or part-time), the missing data for
Germany, the Netherlands and Slovakia are generated
using a similar backcasting, but also taking into account
observed changes in employment for the categories of
the breakdown variable(s).

72

Annex 3: Comparing employment shifts using different job quality measures
Most of the analysis in this and previous EJM annual
reports has concentrated on the job-wage as the
primary ranking criterion. Wages are clearly an
important dimension of quality of work and have the
additional advantages of being reasonably well
measured and highly correlated with other relevant
dimensions of job quality. The use of mean or median
job (or occupation) wage as the basic ranking criterion
has also been the common approach of much of the
employment polarisation literature (see Goos and
Manning, 2007).
But there are other proxies of job quality and Figures A1
and A2 make use of two different measures to rank
‘jobs’ (as always using the jobs-based method, these are
defined as specific occupations in specific sectors that
are then assigned to five quintiles of employment). The
first is the average educational level of the job-holder in
a job. The second is based on dimensions of job quality
more broadly considered – including contractual
stability, work autonomy, working time flexibility,
development opportunities and risk exposure – and
relies on answers to 38 questions in Eurofound’s fifth
EWCS. This is called a ‘non-pecuniary job quality’
ranking as it deliberately omits wage income data in
order to avoid overlapping with the existing, principal
job-wage ranking. Data are shown for two periods:
Figure A1 for the late crisis period of contracting
employment (2011 Q2 to 2013 Q2) and Figure A2 for the
recovery (2013 Q2 to 2016 Q2).
Figure A1: Employment change (% per annum), by wage, education and job quality quintile, EU,* 2011 Q2–
2013 Q2
Wage Education
2 2
0 0
-2 -2
* EU27 (excluding Luxembourg)
Notes: Q2 data in each year. Data adjusted for breaks in France, Germany, the Netherlands and Slovakia as indicated in Annex 2. Due to data
limitations, job quality rankings could be generated only for jobs accounting for around 90% of EU employment.
Source: EU-LFS, SES, fifth EWCS (authors’ calculations)
Annexes
During 2011–2013, as Figure A1 highlights, the job-wage
ranking tended to generate more polarised patterns of
employment change (greater relative growth at the
edges, less in the middle) than the other two ranking
criteria. Net employment destruction was concentrated
in mid-paid and mid-low-paid jobs. Employment shifts
in terms of the education and job quality rankings were,
however, clearly upgrading with greatest net
employment destruction progressively from the bottom
quintile upwards.
At the same time, there are some obvious points of
similarity between the three charts reflecting the high
correlation (r > 0.7) between the different measures of
job quality used to rank jobs. The top quintile is growing
fastest regardless of the ranking criterion, and
employment growth is relatively weaker in the lower
quintiles.
The reason for the (modest) differences between the
three measures is that a substantial proportion of jobs
in the middle of the wage distribution have a relative
wage premium (a higher relative position in terms of
wages than education or non-pecuniary job quality
attributes), and these jobs were responsible for a large
share of overall job destruction during and after the
global financial crisis. Two illustrative examples can be
seen in the list of large-employing jobs with the fastest
rates of employment decline (see Table 2). The first is
that of building and related trades workers in the
construction of buildings sector, which is in the third
Job quality
2
0
-2
73
Occupational change and wage inequality: European Jobs Monitor 2017
Figure A2: Employment change (% per annum), by wage, education and job quality quintile, EU,* 2013 Q2–
2016 Q2
Wage Education
4 4
2 2
0 0
* EU27 (excluding Luxembourg)
Notes: Q2 data in each year. Data adjusted for breaks in France, Germany, the Netherlands and Slovakia as indicated in Annex 2. Due to data
limitations, job quality rankings could be generated only for jobs accounting for around 90% of EU employment.
Source: EU-LFS, SES, fifth EWCS (authors’ calculations)
quintile as measured by wages but in the bottom
quintile as measured by educational attainment or
broader job quality. The second is that of metal and
machinery trade workers in the manufacture of
fabricated metal products, which is in the third, middle
wage quintile but in the second education quintile and
in the bottom quintile as measured by broader job
quality. It was precisely such, primarily male, jobs in the
construction and manufacturing sectors that accounted
for most of the net job destruction in 2011–2013 (and,
previously, from the onset of the crisis in 2008).
The above suggests that the different characterisations
of employment shift, based on the three proxies of job
quality, arise in large part for sector-specific and
business cycle reasons over quite a short time period
(2008–2013). However, similar findings have also been
identified in developed economies over longer time
frames. Based on a jobs-based analysis of the pre-crisis
period (1990–2008) in five European countries, Oesch
(2013) noted that ‘the employment drop in the lower-
middle and middle quintiles concerns comparatively
well-paid working-class jobs’. In similar fashion, the jobs
that were disproportionately affected by employment
loss during and after the crisis were male, blue collar,
primarily mid-paying jobs that do not require high levels
of formal education.
During the recovery period (2013–2016), each quintile
has recorded employment growth according to all three
of the rankings (Figure A2). As previously, the greatest
growth occurred in the top quintile in each (between 2%
and 2.5% per year). What has changed is that
74
Job quality
4
2
0
employment growth has been much more broadly
spread across the distribution for each measure, and
this has tended to mute some of the patterns previously
observed. What were clearly polarising shifts by job-
wage ranking are only very mildly polarised after 2013.
The pattern has been one of upgrading in terms of job-
education ranking, but again less sharply than before
and with relatively fast growth in jobs in the second
quintile. Finally, in terms of broader job quality, the
pattern observed post-2013 is quite distinctive from
that of the earlier period, with strong employment
growth in the bottom quintile – the reverse of what had
occurred previously.
In part, there has been some employment rebound in
the types of jobs that contracted during the extended
crisis period, for example the largely male jobs of drivers
and mobile plant operators in warehousing were among
the fastest-growing jobs (see Table 2). More generally,
these types of jobs have not continued to incur the
declines that took place during the crisis. In addition,
many of the fastest-growing large-employing jobs have
been in lower-level services. Jobs such as cleaners and
helpers in services to buildings, and personal services
workers and food preparation assistants in food and
beverages have contributed much to employment
growth during the recovery, but are ranked in the
bottom quintile by most of the ranking measures.
Nonetheless, the one persistent and probably structural
trend has been for ‘good’ jobs to grow faster than
poorer-quality jobs – regardless of the measure used to
assess the quality of the jobs.
 Annexes

Annex 4: Categorisation of the service sector

Table A3: Knowledge-based services aggregation: Breakdown by NACE Rev. 2 two-digit sector code
Private knowledge-intensive 50 to 51 Water transport, Air transport
services
58 Publishing activities
59 to 63 Motion picture, video and television programme production, sound recording and music
publishing activities, Programming and broadcasting activities, Telecommunications, Computer
programming, consultancy and related activities, Information service activities
64 to 66 Financial and insurance activities (section K)
69 to 71 Legal and accounting activities, Activities of head offices; management consultancy activities,
Architectural and engineering activities; technical testing and analysis
72 Scientific research and development
73 to 74 Advertising and market research, Other professional, scientific and technical activities
75 Veterinary activities
78 Employment activities
80 Security and investigation activities
90 to 93 Arts, entertainment and recreation (section R)
Public knowledge-intensive 84 Public administration and defence, compulsory social security (section O)
services
85 Education (section P)
86 to 88 Human health and social work activities (section Q)
Less-knowledge-intensive 45 to 47 Wholesale and retail trade; repair of motor vehicles and motorcycles (section G)
services
49 Land transport and transport via pipelines
52 Warehousing and support activities for transportation
53 Postal and courier activities
55 to 56 Accommodation and food service activities (Section I)
68 Real estate activities
77 Rental and leasing activities
79 Travel agency, tour operator reservation service and related activities
81 Services to buildings and landscape activities
82 Office administrative, office support and other business support activities
95 Repair of computers and personal and household goods
94 Activities of membership organisations
96 Other personal service activities
97 to 99 Activities of households as employers of domestic personnel; Undifferentiated goods and
services-producing activities of private households for own use (section T), Activities of extraterritorial
organisations and bodies (section U)

Source: Eurostat; Eurostat indicators on high-tech industry and knowledge-intensive services, available at
http://ec.europa.eu/eurostat/cache/metadata/Annexes/htec_esms_an3.pdf

75
Occupational change and wage inequality: European Jobs Monitor 2017

Annex 5: Member State shares of employment in top 12 jobs

Table A4: Top 12 employing jobs at EU level by % of employment, 2016 Q2

Occupation Sector EU AT BE BG CY CZ DE DK EE ES FI FR EL HR HU

Sales workers Retail trade 5.4 5.6 4.3 8.7 7.4 5.3 4.8 5.8 4.5 7.3 4.8 4.0 9.7 6.5 5.7

Teaching professionals Education 4.4 4.5 5.6 3.7 6.1 4.2 3.2 5.4 4.9 5.2 4.3 4.3 6.7 5.1 4.3

Agricultural workers Crop and animal 2.8 3.8 0.5 3.5 1.9 0.8 0.7 1.3 1.0 1.6 2.7 2.3 11.2 4.9 2.2
production, etc.
Health professionals Human health 2.2 1.3 3.4 2.2 2.5 2.1 2.0 3.3 1.4 2.8 1.3 1.8 2.3 1.4 0.7
activities
Personal service workers Food and beverage 2.0 2.3 1.4 2.9 2.8 1.9 1.3 1.6 1.2 5.1 1.5 1.3 5.2 3.6 2.0
services
Drivers/mobile plant Land transport etc 1.8 1.3 1.6 3.3 1.2 2.5 0.7 1.5 3.1 2.3 2.6 2.0 2.0 1.8 2.4
operators
Building workers Specialised 1.8 2.3 2.3 0.6 1.5 2.7 1.8 2.3 1.1 1.5 1.5 2.2 1.6 1.4 1.6
construction
Health associate professionals Human health 1.7 2.5 1.3 0.2 0.2 1.2 3.6 0.6 1.5 0.6 3.5 2.1 1.4 2.5 1.8
activities
Business and administration Public administration 1.4 1.3 1.3 1.0 1.1 1.6 2.8 0.9 1.1 0.7 0.8 1.3 0.6 1.1 1.9
associate professionals
Building workers Construction of 1.0 0.7 1.0 2.0 1.8 0.8 0.5 0.2 2.7 1.2 1.8 0.2 0.8 1.1 1.3
buildings
Cleaners and helpers Services to buildings 1.0 0.9 1.7 0.2 1.0 0.4 1.1 0.9 0.4 2.0 1.2 0.9 0.5 0.6 0.4

Personal service workers Other personal service 0.9 1.2 0.9 0.7 1.9 0.9 0.9 0.4 0.8 1.2 0.7 0.8 0.8 1.3 1.1
activities
Total share of employment in top 12 employing jobs 26.4 27.7 25.2 29.2 29.5 24.5 23.2 24.2 23.8 31.7 26.7 23.1 42.8 31.3 25.5

Occupation Sector IE IT LT LU LV MT NL PL PT RO SE SI SK UK

Sales workers Retail trade 5.6 6.2 5.6 1.7 5.7 6.8 4.8 7.0 5.5 6.0 3.8 5.7 6.2 4.6

Teaching professionals Education 4.4 5.0 5.4 6.1 5.0 4.9 4.1 4.5 4.9 3.1 6.6 6.2 4.1 4.5

Agricultural workers Crop and animal 4.3 2.0 4.9 0.6 2.2 0.8 1.2 8.5 1.8 19.2 0.9 2.9 0.6 0.4
production, etc.
Health professionals Human health 3.3 1.3 2.8 2.2 1.2 2.2 2.4 2.4 2.3 1.6 3.4 2.1 0.8 3.3
activities
Personal service workers Food and beverage 1.7 3.0 1.1 1.7 1.6 1.5 1.8 0.9 2.1 1.6 1.0 2.4 2.2 1.2
services
Drivers/mobile plant Land transport etc 2.1 1.6 2.9 1.4 3.2 0.9 1.3 3.0 1.6 3.2 2.1 1.8 3.0 1.6
operators
Building workers Specialised 1.9 2.1 1.2 1.3 0.4 1.6 1.2 2.0 0.9 0.7 1.8 1.5 2.0 1.8
construction
Health associate professionals Human health 0.5 2.3 0.6 0.7 0.7 1.1 1.5 0.5 0.5 1.0 0.6 1.6 2.2 0.6
activities
Business and administration Public administration 1.5 0.5 1.0 2.5 1.5 1.2 1.0 1.6 1.0 0.5 1.2 0.7 1.6 1.1
associate professionals
Building workers Construction of 0.8 1.4 1.9 0.8 2.5 1.1 0.8 1.5 2.0 3.3 1.0 0.3 1.8 0.9
buildings
Cleaners and helpers Services to buildings 0.9 1.4 0.8 1.1 0.2 0.8 0.9 0.6 0.6 0.3 0.8 0.7 0.2 0.9

Personal service workers Other personal service 1.3 1.2 0.9 0.9 1.2 1.0 0.9 0.7 1.2 0.6 0.5 0.7 0.7 0.9
activities
Total share of employment in top 12 employing jobs 28.2 27.8 29.1 20.9 25.3 23.7 21.7 33.1 24.5 41.0 23.7 26.7 25.3 21.8

76

Annex 6: Occupations and the evolution of wage inequality over three
decades
This annex includes a tentative analysis of changes in
wage inequality across occupations and countries over
the last three decades using the Luxembourg Income
Study (LIS) database.18 This database is the largest
available database of harmonised income microdata
collected by multiple countries over a period of
decades. It provides household and person-level data
on market and government income, demography,
employment and expenditures from countries in
Europe, North America, Latin America, Africa, Asia and
Australia since 1965. Although the measures of wages
and occupation in the LIS are problematic for the
purposes of this analysis, even more so than EU-SILC,
they can be used for an approximation of longer-term
trends using the same methods presented in Part 2.19
The variance decomposition approach previously used
for the EU-SILC and SES datasets is reproduced here to
evaluate whether the structuring role played by
occupations in the distribution of wages changed in six
European countries across the last two or three
decades, according to the LIS database. The results are
shown in Figures A3 and A4 for raw and logged wages
for Denmark, Finland, France, Germany, the
Netherlands and Spain from 1984 to 2013. As might be
expected because of the higher level of aggregation of
the occupation and sector variables used (one-digit
level), the share of wage variance explained by
occupations and sectors is around 10% lower in the LIS
than in EU-SILC for the common period of analysis
(2005–2013), between 30%–40% of the total.
The patterns for the last decade according to LIS are
reasonably consistent with those previously discussed
18 Further information about the LIS database is available at http://www.lisdatacenter.org/
19 For the measure of wages, the LIS variable PILE (personal paid employment income) is used, which cannot be adjusted by hours of work because it has
many missing values and countries. ISCO and NACE are both measured at the one-digit level. In some countries and years, there is a higher level of detail,
but it is impossible to provide consistent trend analysis beyond one digit.
Annexes
using EU-SILC. Both datasets show an increasing role of
occupational wage differentials in structuring wage
inequality in Finland, Germany (only when wages are
logged) and Spain in the most recent period and a
decline in the share of wage variance explained by
occupations in Denmark and France. In the Netherlands,
the trends seem to be inconsistent, with a high degree
of volatility. But the most interesting aspect of Figures
A3 and A4 is that they also show the previous trends.
The increase in the role played by occupations in
structuring wage inequality observed in Germany and
Spain seems to extend to previous decades, too; the
same happens with France in the opposite direction,
with a clear long-term decrease. The only case in which
the long-term trend seems at odds with the most recent
period is Finland, where the long-term trend is one of
decline, contrasting with the most recent period. The
results for Denmark and the Netherlands seem
problematic, for different reasons. In the case of the
Netherlands, the high volatility suggests data problems,
making it impossible to identify any clear trend. In the
case of Denmark, there is surprising inconsistency
between the lines for occupation only and the lines for
the combination of occupation and sector (Job).
Whereas occupation only accounts for a growing share
of wage inequality over the period, the combination of
occupation and sector shows a clear decline over time.
This, which happens only in Denmark, implies that the
effect of sector on wage inequality shrank very
significantly over the period. Although it is theoretically
possible, this effect seems implausibly large and may
reflect problems in the classification of sector.
77
Occupational change and wage inequality: European Jobs Monitor 2017

Figure A3: Share of variance explained by job and occupation, wages not logged, six Member States
Germany Denmark Spain
.4

.3

.2

.1

Finland France Netherlands

.4

.3

.2

.1

0
1980 1990 2000 2010 1980 1990 2000 2010 1980 1990 2000 2010

Occupation Job
Source: LIS database (authors’ analysis)

Figure A4: Share of variance explained by job and occupation, wages logged, six Member States
Germany Denmark Spain

.4

.3

.2

.1

Finland France Netherlands

.4

.3

.2

.1

0
1980 1990 2000 2010 1980 1990 2000 2010 1980 1990 2000 2010

Occupation Job
Source: LIS database (authors’ analysis)

78
 Annexes

Figure A5: Theil decomposition of paid employment income by occupation, six Member States
Germany Denmark Spain
.3 .5

.4
.2
.3

.2
.1
.1

0 0

Finland France Netherlands

.3 .5

.4
.2
.3

.2
.1
.1

0 0
1980 1990 2000 2010 1980 1990 2000 2010 1980 1990 2000 2010

Within Between Explained

Note: The ‘Explained’ indicator is plotted on the right-hand axis.
Source: LIS database (authors’ analysis)

Figure A5 illustrates a Theil index decomposition
approach. As with earlier in the report, the Theil index
(itself an indicator of wage inequality) is broken down
into a within and a between component, also displaying
the share that the between component represents in
the total Theil (‘explained’). This ‘explained Theil’
indicator is comparable to the trends in the variance
explained shown in Figures A3 and A4. As already
discussed in the report, Figure A5 shows that the
between-jobs component of wage inequality is much
more stable than inequality within jobs. If between-jobs
differentials were driving wage inequality
developments, the between-component should be
growing while the within-component should remain
stable or decline. There are two cases where this
happens more or less consistently over the period:
Germany and Spain. In Spain, within-job wage
inequality actually declines until 2010, whereas
between-job inequality remains stable or even
increases slightly. In Germany, although within-job and
between-job inequality develop similarly, the latter
grows faster than the former. Consequently, in both
cases, according to this approximation using LIS data,
occupational wages contributed positively to growing
wage inequalities. In France, the exact opposite is
observed after 1989, with declining between-job
inequality and expanding within-job inequality (in the
1980s, occupational wage differentials also grew in
France, according to this approach). In the three
remaining countries, there are large shifts, suggesting
data problems again, but overall the between-job
component is more stable or runs in parallel to within-
job inequalities, indicating that it did not play a
significant role in overall developments.

79
Occupational change and wage inequality: European Jobs Monitor 2017

Annex 7: Detailed examination of occupations and wage inequality

in Spain
The analysis that follows endeavours to contrast the Column 5; by occupation and sector (not combined), in
findings of this report with those obtained using a Column 6; and by jobs (the combination of occupation
national-level register dataset from Spain, the and sector), in Column 7.
Continuous Sample of Working Life (Muestra Continua
Table A5 shows that, as already discussed in the report,
de Vidas Laborales, MCVL). The MCVL is an
occupation is a very important factor structuring wage
administrative dataset built upon the computerised
inequality, more so than sector, accounting for 20%–
records of the Spanish Social Security, the Continuous
30% of total wage inequality in the years shown.
Municipal Register and the tax data of the National
Second, although occupation is more important,
Revenue Agency. Since 2004, this database has provided
crossing it with sector (generating the base
annual information on more than one million people
classification of ‘jobs’) contributes significantly to the
who have had some kind of work relationship with the
explanatory power of the classification. Between-jobs
Social Security, regardless of the duration or the nature
wage differentials account for 40%–45% of the total
of the relationship (for further details about this
variance in log daily wages, increasing until 2011 and
dataset, see Arranz and García-Serrano, 2011 and 2014).
decreasing afterwards. The percentage of variance
Table A5 presents a variance decomposition approach explained by jobs in wage inequality is 44% in 2010, very
(of log daily wages in real terms, with base 2011) for similar to the value of 40% estimated earlier using SES
Spain to explain wage inequality by differences between data for Spain. The small differences could be due to the
and within jobs during the last decade. This table is measure used in the databases for wages: daily wages in
similar to Table 3 in Chapter 5 (constructed using the the MCVL and wage per hour in the SES.
SES 2010 dataset). Column 1 contains the year, Column
There is a very significant drop in the share of variance
2 contains the number of observations (individuals)
explained by jobs between 2011 and 2012, which is very
available each year in this dataset, and Column 3
probably a statistical artefact, a result of a change in the
contains the number of jobs that corresponds to one-
classification of occupations. Discounting such obvious
digit occupation level 20 combined with one-digit sector
discontinuity, the general trend is one of remarkable
level (16 categories of NACE). The number of these jobs
stability, especially if one considers how complex this
varies between 193 and 206 over the period 2005–2014.
period was in terms of labour market developments,
The percentage of variance of log daily wages explained
first with very fast employment creation until 2008, then
by occupation only is in Column 4; by sector, in
with a massive expansion of unemployment. These

Table A5: Impact of occupation on (logged) wage inequality

% of variance of log daily wages explained by: Human capital approach

9.Wages net of
6. Job 8.Variance explained education and tenure,
2. No.of 3. No. of 4. Occupation 5. NACE category + by a model with variance explained by
1. Year observations jobs only only NACE 7. Jobs education and tenure jobs
2005 571,687 204 27.2 21.4 39.0 40.7 14.6 29.5
2006 594,780 206 26.8 20.0 37.9 39.7 15.1 27.9
2007 615,374 202 26.8 19.7 37.6 39.4 12.9 29.3
2008 617,846 200 27.4 21.2 38.8 40.5 15.0 27.8
2009 589,555 200 29.1 25.9 41.8 43.5 17.2 29.0
2010 576,550 198 29.7 27.1 42.8 44.5 18.0 29.1
2011 567,423 195 29.6 26.5 42.1 43.8 18.0 28.4
2012 519,144 197 21.5 10.6 28.5 30.2 15.9 18.0
2013 508,605 193 21.3 10.9 28.5 30.2 16.3 17.6
2014 516,092 194 20.9 10.6 28.0 29.8 16.4 17.1

Source: MCVL, 2005–2014

20 The occupational classification of MCVL is similar but not identical to ISCO at one-digit level. There are 10 categories: 1. Engineers and graduates;
2. Technical engineers and other skilled workers; 3. Chief and departmental heads; 4. Other semi-skilled workers; 5. Skilled clerks; 6. Auxiliary workers;
7. Semi-skilled clerks; 8. Skilled labourers; 9. Semi-skilled labourers; 10. Unskilled labourers.

80

results are roughly consistent (though with small
differences in magnitudes) to those detected with the
EU-SILC and LIS databases for Spain.
In a further analysis, the human capital approach
(a hypothesis reviewed previously with SES data) was
tested, and results are shown in Columns 8 and 9. First,
Column 8 shows the share of the variance of log wages
that can be explained by a model using education and
tenure as predictors. This approach accounts for a
significant amount of the total wage variance over the
period, although it is far below the results for jobs
21 The residuals from the predicted values of the model shown in Column 8 (as described in Chapter 5, Table 3 for the SES dataset).
Annexes
(approximately two or three times lower). The variance
decomposition analysis by job is repeated using a
variable net of the effect of education and tenure 21 in
Column 9. Although the share of variance explained
decreases in all years, between-job differentials still
account for a significant share of the wage inequality
between wages net of differences in human capital
(28%–29% in 2005–2011 and 17%–18% in 2012–2014).
As discussed in Chapter 5, human capital differences
explain part of the role played by occupations, but wage
differentials cannot be reduced to differences in human
capital.
81
EF1710EN
 TJ-AN-17-001-EN-N
In 2016, somewhat later than in other developed
economies, the EU recovered all the net
employment losses sustained since the global
financial crisis. Employment growth since 2013 has
been only modestly skewed towards well-paid
jobs; growth has been robust in low-paid and
mid-paid jobs too. Newer jobs are increasingly
likely to be full time rather than part time. Part 1 of
this sixth annual European Jobs Monitor report
takes a detailed look at shifts in employment at
Member State and EU levels from 2011 Q2 to 2016
Q2. Part 2 examines the role that occupations play
in structuring European wage inequality. It finds
that occupations have their own effect on wage
inequality as well as mediating other factors such
as human capital and social class. It also finds that
occupational dynamics did not drive wage
inequality developments in the last decade, a
period of intense structural change in European
labour markets.

The European Foundation for the Improvement of

Living and Working Conditions (Eurofound) is a
tripartite European Union Agency, whose role is
to provide knowledge in the area of social,
employment and work-related policies.
Eurofound was established in 1975 by Council
Regulation (EEC) No. 1365/75, to contribute to the
planning and design of better living and working
conditions in Europe.

ISBN: 978-92-897-1580-5
doi:10.2806/332137